Whether you are filing Chapter 7 bankruptcy or Chapter 13 bankruptcy, you are likely to hear the term “priority debts.” Before proceeding, you need to understand what this term means and how it affects your case.

What Are Priority Debts?

Debts in bankruptcy can be either secured or unsecured. When debts are secured, it means that the creditor has rights to collateral that can be seized to satisfy the debt. Even if you discharge your personal liability for the debt, the creditor will still be able to take the collateral you pledged after the bankruptcy case is complete. When no such collateral exists, the debt is considered unsecured and can be fully discharged in bankruptcy.

priority debt checklist

The term “priority debt” refers to specific unsecured debts that have been deemed more important than other unsecured debts. Some of the debts that typically fall into this category include overpayment of government benefits, criminal fines, personal injury liability obligations, sales taxes, payroll taxes, certain income taxes, spousal support and child support. Most other unsecured debts are considered “non-priority debts” and will not receive special treatment during the bankruptcy case.

How Are Priority Debts Treated in Bankruptcy?

Priority debts will be treated differently during the case based on the type of bankruptcy you choose to file. In Chapter 7 bankruptcy, priority debts must be paid before non-priority debts are paid. This means that, after the court has seized your non-exempt assets, any proceeds will be used to cover your priority debts before non-priority creditors can seek payment. All debts that remain unpaid after your resources have been exhausted will be discharged before the case is closed.

In Chapter 13 bankruptcy, priority debts must be paid in full. This means that you will be required to include these debts in your payment plan, which will raise the amount of your obligation over the course of the bankruptcy.

Seeking Assistance from a Bankruptcy Attorney

Bankruptcy laws can be complex. Only a qualified bankruptcy attorney can tell you exactly how each debt will be treated in your case. Likewise, your bankruptcy attorney will be able to help you decide which type of bankruptcy will be the most appropriate for your needs, and they will be able to answer any other questions you may have.

At Clark and Washington, we have been helping clients in Atlanta with bankruptcy cases since the 1980s. We understand how these cases work, and we are here to make sure your case is a smooth and financially beneficial as possible. Please contact us today to make an appointment or to learn more about filing for bankruptcy.