Gap Creditor Law and Legal Definition

Gap creditor refers to a creditor giving credit, or lending money to a debtor in the period between the filing of an involuntary bankruptcy petition and the entry of the order for relief. A gap creditor cannot avoid the preclusionary effect that has on gap claims regarding the allowance of administrative expenses. A gap creditor's claim cannot be accorded as an administrative priority. Generally the claims of gap creditors are regarded as having accrued prior to the date of the filing of the petition and cannot be deemed as having occurred during the administration of the estate. In an involuntary case there are also "gap" creditors. These creditors do business with, or extend credit to the debtor post-petition prior to the entry of the order for relief. However, gap creditors are prioritized immediately below administrative claimants.[In re Handy Andy Home Improvement Ctrs., 196 B.R. 87, 95 (Bankr. N.D. Ill. 1996)].