(1)    Claims against contributing contractor. Except as provided in sub. (2) or (3), the department shall pay from the appropriate sources under s. 126.72 the following default claim amounts:

      (a)    For each default claim allowed under s. 126.70 against a grain dealer or milk contractor who was a contributing contractor when the default occurred:

         1.    Eighty percent of the first $60,000 allowed.

         2.    Seventy-five percent of any amount allowed in excess of $60,000.

      (b)    For each default claim allowed under s. 126.70 against a grain warehouse keeper who was a contributing contractor when the default occurred, 100 percent of the first $100,000 allowed.

      (c)    For each default claim allowed under s. 126.70 against a vegetable contractor who was a contributing contractor when the default occurred:

         1.    Ninety percent of the first $40,000 allowed.

         2.    Eighty-five percent of the next $40,000 allowed.

         3.    Eighty percent of the next $40,000 allowed.

         4.    Seventy-five percent of any amount allowed in excess of $120,000.

   (1m)   When default occurs. For the purposes of this chapter, a default occurs on the date on which payment or delivery becomes overdue.

   (2)   Claims against contractor who has filed security. If the department allows default claims under s. 126.70 against a contractor who has security on file with the department, the department shall convert that security and use the proceeds as follows:

      (a)    If the contractor was not a contributing contractor when the default occurred, the department shall use the security proceeds to pay the full amount of the allowed claims, except that, if the security is not adequate to pay the full amount of the allowed claims, the department shall pay claimants on a prorated basis in proportion to their allowed claims.

      (b)    If the contractor was a contributing contractor when the default occurred, the department shall use the security proceeds to reimburse the sources under s. 126.72 from which the department makes any claim payment under sub. (1). If the security amount exceeds the amount payable under sub. (1) from the sources under s. 126.72, the department shall use the remaining security proceeds to pay the balance of the allowed claims. If the security amount is not adequate to pay the full remaining balance, the department shall pay claimants on a prorated basis in proportion to their allowed claims.

      (c)    Notwithstanding par. (b), if the contractor was a contributing contractor when the default occurred, the department may, at its discretion, pay claims directly from security proceeds rather than from a fund source under s. 126.72. If the department acts under this paragraph, the department shall first pay claims in the amounts provided in sub. (1). If the security amount exceeds the amount payable under sub. (1) from the sources under s. 126.72, the department shall use the remaining security proceeds to pay the balance of the allowed claims. If the security amount is not adequate to pay the full remaining balance, the department shall pay claimants on a prorated basis in proportion to their allowed claims.

   (3)   Payment restrictions.

      (a)    The department may not pay any portion of the following from any source identified in s. 126.72:

         4.    A default claim allowed against a contractor who was not a contributing contractor when the default occurred.

         5.    A default claim allowed against a vegetable contractor who is a processing potato buyer, as defined in s. 126.55 (10r), if the default claim is related to a default on an obligation that was outstanding when the processing potato buyer’s participation in the fund became effective under s. 126.595 (2).

      (b)    The department may not pay any default claim under this chapter, except as provided in sub. (1) or (2).

      (c)    If the total amount of default claims exceeds the amount available under s. 126.72, the department shall prorate the available amount among the eligible claimants in proportion to the amount of their allowed claims.

   (4)   Effect of payment. A claimant who accepts payment under sub. (1) or (2) releases his or her claim against the contractor to the extent of the payment. A payment under sub. (1) or (2) does not prevent a claimant from recovering the balance of an allowed claim directly from the contractor.