MEMORANDUM OPINION AND ORDER
ANDERSEN, District Judge.This case is before the court on the appeal of the State of Illinois Department of Revenue (“Department”) from the United States Bankruptcy Court for the Northern District of Illinois. In re Stoecker, 151 B.R. 989 (Bankr.N.D.Ill.1993) (Squires, J., presiding). The principal issue in this case is whether Rule 3002 of the Federal Rules of Bankruptcy Procedure (“Rule__”) acts as a bar date to exclude late filed priority claims in a Chapter 7 case. The court holds that Rule 3002 does not bar late filed priority claims. In addition, the court concludes that principles of equitable subordination should determine whether late filed priority claims are entitled to distribution, and if so, the particular distribution level they are entitled to under 11 U.S.C. § 726. For the following reasons, the bankruptcy court’s decision is reversed and remanded for further proceedings in accordance with this opinion.
BACKGROUND
This ease began as an involuntary Chapter 11 petition against William J. Stoecker (“Debtor”) and was converted to Chapter 7 on February 26, 1990. Thomas E. Raleigh (“Trustee”) was appointed the Chapter 11 trustee of the Debtor’s estate and was reap*581pointed as the Chapter 7 trustee. Pursuant to 11 U.S.C. § 341(a), a meeting of creditors was held on March 28,1990. As required by Rule 3002(c), all proofs of claim were to be filed on or before June 26, 1990 (“the bar date”), ninety days after the meeting. On July 25, 1989, the Department timely filed three proofs of claim totalling $14,852.03.
Prior to the above proceedings, the Debtor had purchased an aircraft from Prewitt Leasing, Inc. (“Prewitt”) on September 30, 1988. At that time, he was president and sole director of Chandler Enterprises, Inc. (“Chandler”). Chandler subsequently leased the aircraft to Grabill Corporation (“Grabill”), a corporation in which the Debtor was president and sole shareholder. Neither Chandler nor Prewitt paid any sales/use tax, withholding tax, or income tax on Chandler’s purchase of the aircraft. The Debtor states that his attorney advised him that there was no sale or use tax properly assessable or payable as a result of the purchase by Chandler or the lease of the aircraft by Chandler to Grabill. Chandler was involuntarily dissolved by the Illinois Secretary of State on June 1, 1990.
After the Department received notice of the Debtor’s bankruptcy filing, the Department researched his liability to the Department. Apparently due to Chandler’s failure to register with the Department and to file any tax returns, the Department did not determine that the Debtor was an officer of Chandler during this initial search. Nevertheless, in approximately February, 1990, the Department conducted a separate investigation into the records of the Federal Aviation Administration. At that time, the Department learned of Chandler’s purchase of the aircraft. The Department wrote two letters to Chandler dated March 7,1990 and June 7, 1990 seeking additional information in order to ascertain whether the purchase of the airplane was subject to use tax. Chandler did not respond to either letter.
On September 7, 1990, the Department issued a Notice of Penalty Liability against Chandler. Between September 26, 1991 and April 9, 1991, the Department attempted to contact Chandler and its officers but was unsuccessful. Subsequently, a Notice of Penalty Liability was issued against the Debtor on August 15, 1991. The Department sent the Debtor a demand for full payment of the tax liability claimed on September 25, 1991. On January 21, 1992, approximately 18 months after the bar date, the Department filed a proof of claim in the amount of $1,476,196.86 for Retailers’ Oceu-pation/Use Tax allegedly owed by the Debtor as the responsible officer of Chandler.
The Trustee objected to the January 21, 1992 proof of claim filing because it was filed after the bar date fixed by Rule 3002(c). In addition, the Trustee also argued that the Debtor is not liable for the use tax under the “occasional sale” exemption.
In the bankruptcy court, the Department argued that the court should allow the claim as an amendment to the earlier filed proofs of claim pursuant to Fed.R.Civ.P. 15. In the alternative, the Department asked the bankruptcy court to use its equitable powers to allow the claim.
In its Memorandum, Opinion, and Order dated November 25, 1992, the bankruptcy court sustained the Trustee’s objection and did not allow the Department’s claim. It found that the Department’s proof of claim was tardily filed. The court reasoned that the claim was an entirely new claim, and not an amendment to an earlier filed claim. Accordingly, the amendment was barred by Rule 3002(c). Furthermore, the court declined to allow the claim under its equitable powers.
The Department filed a motion for reconsideration of the bankruptcy court’s decision to sustain the Trustee’s objection on December 10, 1992. The motion was based in part on the In re Rago, 149 B.R. 882 (Bankr.N.D.Ill.1992) case, which was decided two days prior the court’s original ruling, and reached a contrary result. The court denied the motion for reconsideration on February 23, 1993.
The Department now appeals the bankruptcy court’s decision. This action was a core proceeding before the bankruptcy court under 28 U.S.C. § 157(b)(2)(B). This court has jurisdiction pursuant to 28 U.S.C. § 158(a).
*582 DISCUSSION
Rule 8013 provides that a district court must accept the bankruptcy court’s findings of fact unless clearly erroneous. Fed.R.Bankr.P. 8013; In re Tolona Pizza Prod. Corp., 3 F.3d 1029, 1033 (7th Cir.1993). However, the court may independently examine the bankruptcy court’s conclusions of law. In re Yonikus, 996 F.2d 866, 868 (7th Cir.1993). Accordingly, this court subjects the bankruptcy court’s conclusion’s of law to de novo review. In re UNR Indus., Inc., 986 F.2d 207, 208 (7th Cir.1993).
I. Preliminary Issue
The court must first determine whether the Department improperly raised new matters before the bankruptcy court in its motion for reconsideration. The Trustee contends that the Department improperly used its motion to argue for the first time that untimeliness can never constitute a proper basis for disallowance of a proof of claim. This theory was espoused by Bankruptcy Judge Wedoff in In re Rago.
The Trustee cites Publishers Resource, Inc. v. Walker-Davis Publications, Inc., 762 F.2d 557 (7th Cir.1985), to support the proposition that motions to reconsider serve “to correct manifest errors of law or fact or to present newly discovered evidence.” Publishers Resource, 762 F.2d at 561 (citing Keene Corp. v. Int’l Fidelity Ins. Co., 561 F.Supp. 656, 665-66 (N.D.Ill.1982), aff'd, 736 F.2d 388 (7th Cir.1984)). Moreover, such motions should not “serve as the occasion to tender new legal theories for the first time.” Id. The Trustee also cites Havoco of America, Ltd. v. Sumitomo Corp. of America, 971 F.2d 1332, 1336 (7th Cir.1992) for the broad proposition that a legal argument raised for the first time on a motion for reconsideration is waived if not presented before judgment was entered.
In response, the Department argues that In re Rago represents a significant development in the law pertaining to the area of allowances. Furthermore, the Department subsequently brought to our attention In re Vecchio, 20 F.3d 555 (2nd Cir.1994) which adopted the rationale of In re Rago and was decided after the court denied the motion for reconsideration. The bankruptcy court in the case at hand relied heavily on United States v. Vecchio, 147 B.R. 303 (E.D.N.Y.1992), the decision that In re Vecchio explicitly reversed. In re Vecchio at 556. It is also significant to note that the author, Judge Wedoff, of In re Chirillo, 84 B.R. 120 (Bankr.N.D.Ill.1988), a case cited with approval by the bankruptcy court in this case, later rejected Chirillo by stating that the case was based on the mistaken assumption that a late filed claim is disallowed. In re Rago, 149 B.R. at 885.
In light of these developments, this court holds that the Department’s new argument is properly before the court on appeal. Both In re Rago and In re Vecchio represent highly persuasive authority that the Department could not have presented to the bank: ruptcy court before it delivered its opinion.
Furthermore, the court does not read the Havoco decision as broadly as the Trustee. In that case, the court simply held that a Fed.R.Civ.P. 59(e) motion to alter or amend the judgment “cannot be used to raise new arguments which could and should have been raised before judgment was entered.” Havoco, 971 F.2d 1332 at 1336. The Trustee correctly points out that, before the bankruptcy court entered judgment in this case, limited authority was available to the Department to support the theory it now advances. However, this court can not conclude that a reasonable litigant in the Department’s position should have raised the new argument prior to the bankruptcy court’s decision, particularly when it could not have known about In re Rago or In re Vecchio.
Therefore, the court holds that the Department’s new argument is properly before the court on appeal.
II. Interrelation of Rule 3002 and 11 U.S.C. §§ 501, 502 and 726
The principal issue in this case is whether Rule 3002 acts as a bar date to exclude late filed priority claims in a Chapter 7 proceeding. That rule provides in pertinent part:
(a) NECESSITY FOR FILING. An unsecured creditor or an equity security *583holder must file a proof of claim or interest in accordance with this rule for the claim or interest to be allowed....
(c) TIME FOR FILING. In a chapter 7 liquidation ... a proof of claim shall be filed within 90 days after the first date set for the meeting of creditors called pursuant to § 341(a) of the Code....
Fed.R.Bank.P. 3002. There are also several code provisions dealing with the filing and allowance of proofs of claim, and distribution of property of the estate. Section 501(a) states that “[a] creditor ... may file a proof of claim.” 11 U.S.C. § 501(a). Section 502(a) then explains that, “[a] claim ..., proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest ... objects.” 11 U.S.C. § 502(a). Section 502(b) lists eight categories upon which a party in interest can base its objection. Of particular significance is the provision allowing a party to object if the claim is unenforceable under “applicable law.” 11 U.S.C. § 502(b)(1).
Finally, § 726 describes the distribution of property of the estate:
(a) Except as provided in section 510 of this title, property of the estate shall be distributed—
(1) first, in payment of claims of the kind specified in, and in the order specified in, section 507 of this title;
(2) second, in payment of any allowed unsecured claim, other than a claim of a kind specified in paragraph (1), (3), or (4) of this subsection, proof of which is—
(A) timely filed under section 501(a) of this title;
(B) timely filed under section 501(b) or 501(c) of this title; or
(C) tardily filed under section 501(a) of this title, if—
(i) the creditor that holds such a claim did not have notice or actual knowledge of the case in time for timely filing of a proof of such claim under section 501(a) of this title; and
(ii) proof of such claim is filed in time to permit payment of such claim;
(3) third, in payment of any allowed unsecured claim proof of which is tardily filed under section 501(a) of this title other than a claim of the kind specified in paragraph (2)(C) of this subsection;
(4) fourth, in payment of any allowed claim, whether secured or unsecured, for any fine, penalty, or forfeiture, or for multiple, exemplary, or punitive damages, arising before the earlier of the order for relief or the appointment of a trustee, to the extent that such fine, penalty, forfeiture, or damages are not compensation for actual pecuniary loss suffered by the holder of such claim;
(5) fifth, in payment of interest at the legal rate form the date of the filing of the petition, on any claim paid under paragraph (1), (2), (3), or (4) of this subsection; and
(6) sixth, to the debtor.
11 U.S.C. § 726.
The Department argues that because these code sections are in conflict with Rule 3002, the code provisions should prevail. U.S. v. Cardinal Mine Supply, Inc., 916 F.2d 1087, 1089-90 (6th Cir.1990). According to the Department, a conflict exists because Rule 3002 makes it clear that for a proof of claim to be allowed it must be filed within 90 days after the date set for the meeting of creditors. In contrast, § 501 contains no prohibition on the filing of claims after the bar date and § 502 states that a claim is allowed assuming the absence of a valid objection. None of the categories listed in § 502(b) upon which a party can base an objection explicitly includes the late filing of a claim. The Department emphasizes that §§ 726(a)(2)(C) and 726(a)(3) explicitly provide for “allowed claims, proof of which is tardily filed.” (emphasis added). This approach was advanced by the recent In re Rago case.
The bankruptcy court rejected this argument and did not find that Rule 3002 was in conflict with the code. In re Stoecker, 151 B.R. at 995. The court stated that § 502(b)(1) provides for disallowance of a claim that is unenforceable under applicable law and that Rule 3002(c) constitutes applicable law. Id. Therefore, the court concluded that § 502(b)(1) disallows a claim not filed *584pursuant to Rule 3002(c) when a party in interest raises an objection to the claim. Id.
According to the Department, this rationale is flawed because there is still a conflict between Rule 3002 and § 726(a). In its opinion denying the motion for reconsideration, the bankruptcy court addressed this problem. It noted that, during those infrequent situations when there are sufficient funds available to fully pay all claims that were both timely and' tardily filed, the trustee would not need to file an objection to late filed claims. The court stated that in these cases there is no need for a trustee to object to late filed claims because there are enough funds to pay all claims.
In response, the Department argues that the bankruptcy court’s reasoning is flawed for three reasons. First, it assumes that a claim which is untimely filed under Rule 3002 is allowed under § 502(a) unless the trustee objects to it. However, Rule 3002 explicitly states that a claim not filed in conformity with it is not allowed. Second, the court’s position also assumes that a late filed claim is only disallowed if the trustee files an objection. If the trustee does not object, the claim is allowed. Third, the court’s conclusion is subject to abuse because § 502(a) allows any party in interest to object. Thus, a creditor with a timely but subordinated claim would always object to a late filed claim to increase its distribution. A debtor who is entitled to all funds left over after payment of allowed claims would also object to late claims for the same reason.
The Department urges the court to reject the position taken by courts in cases exemplified by In re Zimmerman, 156 B.R. 192 (Bankr.W.D.Mich.1993) (en banc). In re Zimmerman was a Chapter 13 case and described two types of allowance of claims: 1) procedural allowance under § 501 which looks to Rule 3002 to establish time limits and 2) substantive allowance pursuant to § 502 where a claim is considered on the merits. Id. at 198. According to this analysis, a claim is deemed filed under § 501(a) only if it is filed within the time limits set by Rule 3002. Id, If the claim is filed late it is not allowed, and § 502 never comes into play. Id.; see also In re Johnson, 156 B.R. 557 (Bankr.N.D.Ill.1993). The Trustee attempts to extend this rationale to resolve the conflict between Rule 3002 and §§ 726(a)(2)(C) and 726(a)(3). It asserts that the § 726 provisions provide only for distribution of claims allowed on the merits under § 502.
Not surprisingly, the Trustee relies heavily on In re Zimmerman to support his position that tardiness is a ground for disallowance of a claim under § 502. That case recognized that § 501(3) contemplates a timeliness requirement: “If a creditor does not timely file a proof of such creditor’s claim, the debtor or the trustee may file a proof of such claim.” (emphasis added). In re Zimmerman, 156 B.R. at 195-96. It also noted that legislative history indicates that Congress intended for the Bankruptcy Rules to contain the procedural aspects of bankruptcy practice. Id. at 197.
The Trustee next tries to explain why the “tardily filed” language exists in §§ 726(a)(2)(C) and 726(a)(3). It states that it is appropriate for the provisions to contain this language to distinguish substantively meritorious claims from substantively infirm ones. Further, it contends that In re Rago does not apply here because that case involved a late filed original claim, whereas the Department has maintained throughout that its claim is an amendment of a previously filed timely claim. See In re Unroe, 937 F.2d 346 (7th Cir.1991).
This court holds that Rule 3002 does not act as a bar date to exclude late filed priority claims in a Chapter 7 case. The decision in In re Vecchio, 20 F.3d 555 (2nd Cir.1994) is particularly persuasive. It stated that, “to the extent Rule 3002 suggests that a late filed claim must be disallowed, it is inconsistent with the text of §§ 726, 502, and 501.” In re Vecchio, at 559; Cardinal Mine, 916 F.2d at 1089. The court observed that § 501 does not impose a timeliness requirement. In re Vecchio, at 559. Similarly, not only is there no requirement in § 726(a) that allowance of a claim requires a timely filing, but §§ 726(a)(2)(C) and 726(a)(3) expressly order the payment of such claims. Id. at 558. Furthermore, untimeliness is not listed as a grounds for disallowance under § 502. Id. at 558-59. This court rejects the Trustee’s no*585tion that the “tardily filed” language was inserted in these provisions to remove substantively infirm claims from distribution. There is no logical reason for Congress to provide an entire list of grounds for disallowance in one provision entitled “Allowance of claims or interests,” while inserting another ground for disallowance in a separate provision entitled “Distribution of property of the estate.”
Accordingly, this court can only conclude that In re Hausladen, 146 B.R. 557, 559 (Bankr.D.Minn.1992) was correct when it stated that Rule S002’s erroneous implication that filing within the prescribed period is a prerequisite to allowance “arose when the drafters of the new Rule 3002 hastefully copied' the substance of old Rule 302 without paying any attention to the major change in the underlying statute.” (emphasis in original). See also In re Rago, 149 B.R. at 885. Section 726 does not bar tardily filed claims. In re Vecchio, at 559 (citing Cardinal Mine, 916 F.2d at 1091).
Since In re Zimmerman is a Chapter 13 case, the court will not apply it here. Unlike Chapter 13 cases where payments are distributed under a plan, § 726 provides for the order of distribution of property of the estate in Chapter 7 cases. Even if In re Zimmerman resolves the conflict between Rule 3002 and §§ 501 and 502, it simply can not resolve the conflict between Rule 3002 and §§ 726(a)(2)(C) and 726(a)(3). Therefore, the court will not apply the reasoning of In re Zimmerman to this Chapter 7 case.
Moreover, the court in In re Vecchio saw no relevance to the fact that the Internal Revenue Service in that case filed amended claims of a previously filed timely claim, as opposed to a late filed original claim. Since the facts in this case are similar, the court does not believe it is necessary to decide whether the Department filed an amended or original claim. Additionally, the court agrees with the Department that the other cases the Trustee cites in support of its argument, i.e., Wilkens v. Simon Brothers, Inc., 731 F.2d 462 (7th Cir.1984), In re Danielson, 981 F.2d 296 (7th Cir.1992), and Holstein v. Brill, 987 F.2d 1268 (7th Cir.1993) do not address the specific issue in this case.
We disagree with the decisions in other jurisdictions which have subordinated first-tier priority claims to the third-tier of distribution as non-priority claims based on the tardiness of their filing. See IRS v. Ulrich (In re Mantz), 151 B.R. 928, 930-31 (Bankr. 9th Cir.1993); In re Elec. Management, Inc., 133 B.R. 90, 92 (Bankr.N.D. Ohio 1991); In re Mayville Feed & Grain, Inc., 123 B.R. 245, 246-47 (Bankr.E.D.Mich.1991). As stated in In re Vecchio:
These courts have also read a timeliness requirement into § 726(a)(1) despite the absence of such language in that provision or in others in the Code, and have failed to address the inconsistencies that arise as a result of their narrow reading of § 726(a)(1) to exclude late filed priority claims, their broad reading of § 726(a)(3) to include late filed priority claims, and their construction of Rule 3002 to permit subordination and not disallowance of such claims.
20 F.3d at 559.
Nevertheless, the court differs with the Department’s contention that priority claims, regardless of when they are filed, are automatically entitled to receive a first level distribution pursuant to § 726(a)(1). The court agrees with In re Rago that such a rule would not encourage finality in the administration of claims. In re Rago, 149 B.R. at 888 (citing In re Evanston Motor Co., 26 B.R. 998, 1005 (N.D.Ill.1983)). This concern is particularly valid when claimants deliberately or negligently fail to file their claims within the time limit established by the Bankruptcy Rules. Id.
Therefore, the court concludes that bankruptcy courts should use principles of equitable subordination when dealing with late filed priority claims. Id. at 889-90; In re Vecchio, at 560; see also In re Virtual Network Serv. Corp., 902 F.2d 1246 (7th Cir.1990). As discussed in In re Rago, 149 B.R. at 889-90, § 726(a) provides that property of the estate shall be distributed “[ejxeept as provided in section 510 of this title.” Section 510(c)(1) provides that “after notice and a hearing, the court may ... under principles of equitable subordination, subordinate for *586purposes of distribution all or part of an allowed claim to all or part of another allowed claim.” As stated in In re Rago:
Where, despite adequate notice or knowledge of the bankruptcy, a priority creditor fails to file a timely proof of claim, it may be equitable to subordinate the creditor’s claim to claims that were timely filed. Since general considerations of fairness will support subordination even without inequitable conduct on the part of the creditor, an unexcused delay by the creditor in filing a proof claim certainly provides a basis to subordinate. Moreover, based on general considerations of fairness, it may be equitable to subordinate a late filed priority claim even where the creditor lacked adequate notice or knowledge, if a distribution has already taken place and an undoing of the distribution would be excessively burdensome. In either situation, the notice and hearing provision of Section 510(c) will assure that the priority creditor can present the arguments against subordination to the court.
Id. at 890.
The court believes that the reasoning in In re Rago fairly and appropriately balances the interests of all parties in these types of cases. Particularly when a priority claim is filed after disbursement of an estate, courts should carefully weigh the benefits and burdens of all parties to reach a just an equitable result. In re Vecchio, at 560.
CONCLUSION
For the forgoing reasons, the decision of the bankruptcy court ruling that § 11 U.S.C. 502(b)(1) disallows a claim not filed pursuant to Rule 3002(e) is reversed. We remand this case to the bankruptcy court to consider whether the Department’s late filed claim should be subordinated under the principles of equitable subordination.