Section 503(b)(9): 'Receipt' Of Goods Discussion

Under Section 503(b)(9) of the Bankruptcy Code, creditors may receive administrative-expense priority for the value of goods "received" by the debtor within 20 days before the debtor's bankruptcy filing in which the goods have been sold to the debtor in the ordinary course of business. 11 U.S.C. § 503(b)(9).

The question becomes: when are goods considered to be "received" under Section 503(b)(9) of the Code?

The majority of Courts construing the word "received" have relied upon the Uniform Commercial Code ("UCC"). For example, in the decision of In re Circuit City Stores Inc., 432 B.B. 225 (Bankr. E.d. Va. 2010), the United States Bankruptcy Court for the Eastern District of Virginia ruled that "received" was the functional equivalent of "receipt" under the UCC, and indicated that the terms should be construed identically.

The Court ruled that "received" means "having taken into physical possession" the goods and should be applied as a "federal definition" for purposes of interpreting Section 503(b)(9). This analysis was subsequently applied by the U.S. Bankruptcy...