Deficiency of Partnership Property: Where the estate of a Chapter 7 partnership debtor lacks sufficient property to fully satisfy all claims against the partnership, the trustee is entitled to a claim for the entire deficiency against each general partner who is personally liable. [B.C. §723(a)]

a. Non-debtor general partners: In attempting to recover the deficiency, the trustee, where practicable, must first pursue any general partner who is not a debtor in a bankruptcy case. Under these circumstances, the court may require the partner to supply indemnity or other assurance of payment, or may enjoin the partner from disposing of property, until the amount of the deficiency is determined. [B.C. §723(b)]

b. General partners who are debtors:  The trustee's claim against the estate of each general partner who is it debtor in a bankruptcy case equals the total of all allowed creditors claims in the partnership's bankruptcy case. The trustee receives distribution on property with the general partner's individual unsecured creditor.

Disallowance of claims of partnership creditors: A creditor's claim for which both the partnership debtor and a general partner are responsible will be disallowed in the bankruptcy case of the general partner, except to the extent that the claim is secured solely by the general partner's property and not by the partnership's assets. [B.C. §723(c)]

2. Excess Recovery by Trustee: If the trustee in the partnership's bankruptcy case recovers from the debtor general partners an amount that exceeds a deficiency remaining after payment by the non-debtor general partners, the surplus will be returned to the debtor general partners' estates in an equitable manner. [B.C. §723(d)].

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