Title 11 — BankruptcyRelease 119-73
§508 Effect of distribution other than under this title
Title 11 › Chapter CHAPTER 5— - CREDITORS, THE DEBTOR, AND THE ESTATE › Subchapter SUBCHAPTER I— - CREDITORS AND CLAIMS › § 508
Summary
If a person who is owed money by a partnership gets paid by a general partner who did not file Chapter 7, and that payment was for a valid claim that was not backed by a lien on the partner’s property, then that person cannot also take money from the bankruptcy. They must wait until the other creditors who should share equally have each been paid the same amount as what that person already received.
Full Legal Text
Title 11, §508
Bankruptcy — Source: USLM XML via OLRC
If a creditor of a partnership debtor receives, from a general partner that is not a debtor in a case under chapter 7 of this title, payment of, or a transfer of property on account of, a claim that is allowed under this title and that is not secured by a lien on property of such partner, such creditor may not receive any payment under this title on account of such claim until each of the other holders of claims on account of which such holders are entitled to share equally with such creditor under this title has received payment under this title equal in value to the consideration received by such creditor from such general partner.
Legislative History
Notes & Related Subsidiaries
Historical and Revision Notes
Legislative Statements
section 508(b) of the House amendment is new and provides an identical rule with respect to a creditor of a partnership who receives payment from a partner, to that of a creditor of a debtor who receives a payment in a foreign proceeding involving the debtor.
senate report no. 95–989
This section prohibits a creditor from receiving any distribution in the bankruptcy case if he has received payment of a portion of his claim in a foreign proceeding, until the other creditors in the bankruptcy case in this country that are entitled to share equally with that creditor have received as much as he has in the foreign proceeding.
Editorial Notes
Amendments
2005—Pub. L. 109–8 designated subsec. (b) as entire section and struck out subsec. (a) which read as follows: “If a creditor receives, in a foreign proceeding, payment of, or a transfer of property on account of, a claim that is allowed under this title, such creditor may not receive any payment under this title on account of such claim until each of the other holders of claims on account of which such holders are entitled to share equally with such creditor under this title has received payment under this title equal in value to the consideration received by such creditor in such foreign proceeding.”
Statutory Notes and Related Subsidiaries
Effective Date
of 2005 AmendmentAmendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such
Effective Date
, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title.
Reference
Citations & Metadata
Citation
11 U.S.C. § 508
Title 11 — Bankruptcy
Last Updated
Apr 6, 2026
Release point: 119-73