What are the different types of Priority Debt?

Chapter 13 permits people, often called debtors, to keep their property and pay creditors all or a portion of unsecured and secured debts over 36 to 60 month period. Chapter 13 consists of a repayment plan which requires debtors to make monthly payments to a bankruptcy trustee. The trustee is responsible for distributing the funds they receive from debtors and paying creditors. However, all creditors are not treated the same. In fact, a bankruptcy trustee will pay some creditors first. The creditors paid first are considered priority debt and are paid in full.

There are different types of priority debt a bankruptcy trustee will pay first. For instance, back mortgage payments and property taxes are considered priority. Payments used to support ex-spouses and children are also considered priority debt. Thus, alimony and child support that are in arrearages are paid first. Debts such as unpaid wages to employees are considered priority debt, according to Nolo. Another type of priority debt is car payments. Therefore, when these types of debt are listed in a repayment plan they are paid before any other debts. For instance, mortgage payments that in arrearages are paid before unpaid credit cards payments.

Debts in bankruptcy are extremely complicated. Therefore individuals who want to understand the creditors who are paid in full or how many months their repayment plan will last should talk with a lawyer. The bankruptcy lawyer will assist people and file their bankruptcy petitions.