Bankruptcy Claims in the U.S.: How They Work (And What the FTX Case Revealed)

When a company in the United States files for bankruptcy, creditors are not left guessing. The U.S. has one of the most structured bankruptcy systems in the world, and understanding how claims work is key to knowing whether, when, and how you might get your money back.

In this post, you will learn how creditor claims are processed, how different claim types are prioritized, and how the law is evolving to deal with complex cases, including the FTX crypto exchange collapse.

A Snapshot of the U.S. Bankruptcy System

Bankruptcy in the United States is governed by federal law. The most common bankruptcy types are:

• Chapter 7: Liquidation of assets.
• Chapter 11: Reorganization, typically used by businesses aiming to continue operations.

When a bankruptcy is filed, a bankruptcy estate is created. This estate holds all of the debtor's legal possessions. Creditors then line up to make claims against this estate.

How Claims Are Filed in the U.S.

To participate, creditors file a Proof of Claim (Form 410) with the Bankruptcy Court. This form identifies:

• How much the debtor owes you.
• Whether your claim is secured by collateral.
• Whether it qualifies for priority treatment.

After filing, claims may be reviewed, approved, or objected to by the debtor, other creditors, or the trustee. Disputed claims are resolved by the court.

More on claim filing: U.S. Courts Bankruptcy Basics.

Who Gets Paid First? The U.S. Priority System

The U.S. follows a strict hierarchy for paying creditors. If there is not enough money to pay a higher tier in full, lower tiers receive nothing.

• Secured Claims: Mortgages and other collateral-backed loans are paid first from the assets tied to the debt.
• Priority Unsecured Claims: Includes employee wages, alimony, and taxes (11 U.S.C. Section 507). These must be paid before general unsecured creditors.
• General Unsecured Claims: Credit cards, customer accounts, and most vendor invoices.
• Subordinated Claims or Equity: Paid only if anything remains.

Digital Platforms and Bankruptcy: The Case of FTX

In November 2022, FTX, one of the world's largest cryptocurrency exchanges, filed for Chapter 11 bankruptcy in Delaware. Millions of customers suddenly found themselves unable to withdraw funds. Many were surprised to learn that, under U.S. bankruptcy law, crypto platform users are often treated as general unsecured creditors.

Unless a company explicitly holds customer assets in a legal trust or segregated account, those assets, including cryptocurrency, are viewed as company property and become part of the bankruptcy estate.

What Happened in the FTX Case?

• Customers argued that the crypto they deposited was held on their behalf, not by FTX.
• Initial court findings showed that FTX commingled customer crypto with corporate assets.
• A settlement proposed that FTX customers could recover up to 90% of their funds, driven by asset recoveries, rising crypto prices, and negotiated plan terms.

More details:
Reuters coverage of the proposed recovery plan
CoinDesk report on customer priority status

What FTX Shows Us About the U.S. Bankruptcy System

• The law does not automatically prioritize customers of digital platforms.
• Creative restructuring plans or settlements can change recovery outcomes, but only after legal battles.
• Regulators are evaluating whether special protections are needed for customers of crypto exchanges and other digital services.

Key Takeaways

• Filing a claim is critical if you are owed money by a bankrupt U.S. entity.
• Your recovery depends on the type and priority of your claim.
• Bankruptcy courts and trustees follow strict rules, but cases like FTX show how digital finance is testing the system.

You can also sell your FTX claims.