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What Are Priority Debts in Bankruptcy?


Bankruptcy can be a daunting and complex process, but understanding the different types of debts involved can help individuals navigate it more effectively. Among these various types of debts, priority debts hold a distinct status in bankruptcy proceedings. In this blog post, we'll explain what priority debts are, how they differ from other debts, and their significance in bankruptcy cases.

What Are Priority Debts?

Priority debts are specific types of debts that receive preferential treatment in bankruptcy proceedings. These debts are given priority over other types of debt when it comes to repayment. The bankruptcy code outlines which debts qualify as priority debts, and they typically include certain obligations that are considered essential or owed to specific creditors.

Let’s take a look at some of the most relevant priority debts below.

Domestic Support Obligations

Domestic support obligations include alimony/spousal support, child support, and other financial obligations as they relate to family law. These debts are often assigned the highest priority, and they are not dischargeable with bankruptcy.

Certain Tax Obligations

The government has an interest in recovering taxes, which means certain tax debts are granted priority over other debts. Tax debt, such as recent income tax debt, property taxes, and payroll taxes, are deemed highly important in bankruptcy cases.

Employee Compensation

If you are an employer, any debts owed to your employees are also given top priority. This includes debt incurred due to unpaid wages or employee benefits.

DUI-Related Personal Injury Claims

If another party won compensation from you for a DUI-related personal injury or wrongful death incident, this debt is among those granted priority in your bankruptcy case.

How Does Bankruptcy Treat Priority Debt? How

In bankruptcy proceedings, priority debts are typically addressed differently from other types of debts, such as secured or unsecured debts.

In Chapter 7 bankruptcy, priority debts are among the first to be paid from the debtor's available assets. These debts are given precedence over other unsecured debts, ensuring that essential obligations are fulfilled.

In Chapter 13 bankruptcy, priority debts are included in the debtor's repayment plan and are paid in full over the duration of the plan. This ensures that these crucial obligations are satisfied over time, providing a structured approach to debt repayment.

Do You Need Help with Bankruptcy?

Priority debts play a crucial role in bankruptcy proceedings, ensuring that essential obligations are addressed promptly and fairly. Understanding the nature of priority debts and their treatment in bankruptcy can help individuals make informed decisions when considering bankruptcy as a debt relief option.

Whether filing for Chapter 7 or Chapter 13 bankruptcy, consulting with a qualified bankruptcy attorney is advisable to navigate the complexities of the process and ensure the best possible outcome given individual circumstances.

Reach out to Arnold Law Group, APC at any time to request a consultation with our experienced bankruptcy lawyers.

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