Priority Debt in Bankruptcy

When one files for bankruptcy their debts are divided into three main classifications to determine what they will have to pay back and what will be wiped out. The three classifications of debts are secured, unsecured, and priority. Priority debts or priority claims are special types of unsecured debts, meaning they aren’t backed by any type of collateral, but that they also receive special protections in bankruptcy.

Priority Debt in Bankruptcy

Priority debt in bankruptcy is paid first, before any unsecured creditors. Common types of priority debt in bankruptcy include family maintenance payments such as alimony and child support, as well as, certain types of tax obligations and debts from personal injury caused by impaired or drunk driving. When filing for Chapter 13 bankruptcy, the costs of these payments must be factored into your repayment plan. In Chapter 7 bankruptcy case priority debts get paid first using the proceeds from property liquidated by the bankruptcy trustee.

Typical Priority Debts in Bankruptcy

Previously mentioned priority debts are alimony, maintenance, or support, however, there are several other debts considered priority when discussing consumer bankruptcies. These typical priority debts include death or injury claims that occurred from alcohol or drug related vehicle wrecks, wages, salaries, and commissions owned by an employer of up to $12,850 per person earned within 6 months of bankruptcy filing, contributions to your employee’s benefit plans rendered within 6 months of bankruptcy filing, debts of up to $6325 owed to certain famers and fisherman, up to $2,850 in deposits made for the lease, rental, or purchased of property or services not already delivered, income taxes due within the previous three year period before bankruptcy filing, trust fund taxes, and customs, duties, and penalties owed to government organizations.

Filing for Bankruptcy

By ridding yourself of other unsecured debt such as credit card or medical debt, it will free your money up to pay down these priority debts and still afford debt relief. Contact your Sacramento bankruptcy attorney before filing your bankruptcy forms and schedules to ensure you are filing the appropriate chapter of bankruptcy and that you don’t leave out important information that could keep your bankruptcy case from being dismissed.