What is the order of claims in distributing a bankruptcy estate?

In a bankruptcy estate distribution, the order of claims is critically important as it dictates how the debtor's assets are allocated among various creditors. The correct sequence starts with secured claims, which are those backed by collateral. Secured creditors have a legal right to specific assets if the debtor defaults, placing them first in line during distribution.

Following secured claims, bankruptcy expenses and priority claims come next. Bankruptcy expenses refer to costs incurred during the bankruptcy process itself, such as administrative fees and legal expenses. Priority claims typically include certain tax obligations and wages owed to employees, which have special standing under the law to ensure they are paid before general unsecured creditors.

Finally, unsecured creditors, who do not have collateral backing their claims, receive distributions from any remaining assets. This structure thus ensures that claimants with greater legal rights or those supporting the bankruptcy process are compensated first.

The other options misplace these categories, leading to an inaccurate representation of the statutory order established in bankruptcy law.