Legal Definitions - administrative expenses

Administrative expenses are costs and expenses that arise after a company files for bankruptcy and are necessary to preserve the company's assets. These expenses have the highest priority among creditor claims in bankruptcy.

For a claim to be considered an administrative expense, it must meet two criteria:

1. The expense must have arisen from a post-petition transaction between the creditor and the debtor.
2. The expense must have been "actual and necessary" to preserve the estate.

Examples of administrative expenses include:

• Wages, salaries, or commissions for services rendered after the commencement of a bankruptcy case
• Utilities expenses
• Taxes incurred by the estate, except taxes of a kind specified in §507(a)(8)
• Compensation and reimbursement awarded to officers of the bankruptcy case, such as trustees, examiners, and professionals
• Actual, necessary expenses incurred by a creditor in filing an involuntary petition under §303

These examples illustrate how administrative expenses are necessary costs and expenses that arise after a company files for bankruptcy and are required to preserve the company's assets. They also show how administrative expenses have the highest priority among creditor claims in bankruptcy.