Claim’s priority under the Mexican Bankruptcy Law.

For clarity on this topic, we will explain the priority regime in different scenarios.

In the first scenario, there are no secured or specially privileged creditors. In this scenario, claims against the estate are seniors to the rest of the creditors. Within the claims against the estate, labor claims against the estate have priority, followed by the post-petition financial transactions,[1] the claims derived from security, repair, conservation, and administration of goods, and finally, those derived from judicial expenses. After the claims against the estate, there are the singularly privileged creditors, within which debtor’s burial costs are ranked first, and then illness expenses. The singularly privileged creditors are followed by the tax creditors and other labor creditors. After the tax creditors and other labor creditors, the general unsecured creditors and the subordinated creditors are positioned.

The second scenario has secured creditors. The rules applicable to the first scenario are also applicable to the second scenario, except that vis-á-vis the value of the collateral of the secured creditors, only labor claims against the estate, claims from security, repair, conservation and administration of goods; claims that derive from judicial expenses and singularly privileged creditors are ahead, but post-petition financial transactions are left outside. The labor claims against the estate have a super-priority vis-á-vis the secured creditors, but only to the extent that debtor’s assets, besides the collateral, are not sufficient to pay them. Thus, if the labor claims against the estate can cover their credits with other assets, the collateral will remain intact.

In the third scenario, there are specially privileged creditors. The rules applicable to the first scenario apply to the third scenario, except that vis-á-vis the value of the special privilege, only labor claims against the estate, claims derived from security, repair, conservation and administration of goods; claims derived from judicial expenses; singularly privileged creditors and tax credits and other labor credits are prioritized. Post-petition financial transactions, however, are not included. The labor claims against the estate have a super-priority vis-á-vis the specially privileged creditors, but only to the extent that debtor’s assets, besides the privilege, are not sufficient to pay them. Thus, if the labor claims against the estate can cover their credits with other assets, the privilege will remain intact.

For further information about bankruptcy law in Mexico, my work “Bankruptcy Law in Mexico”, can be accessed at https://works.bepress.com/francisco-rodrigueznepote/4/, where it can be downloaded freely. A complete translation of the legal text can be found there, as well.


[1] A post-petition financial transaction does not have a super-priority over the other administrative claims or other secured creditors. This could deter a lender from financing a debtor adjudicated in bankruptcy.

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