A priority claim is a debt the bankruptcy trustee will pay in full before paying less important nonpriority debts. For instance, suppose you filed for Chapter 7 bankruptcy, and the bankruptcy trustee appointed to your case sold one of your cars for $10,000. The trustee wouldn't divide the money equally between your creditors.
Instead, if you owed $4,000 for a domestic support obligation, $3,000 in income taxes, and $29,000 in credit card debt, the trustee would pay off the domestic support obligation and taxes because they would be priority claims. Anything left would go to the credit card company's nonpriority claim.
In this article, you'll learn which debts creditors and debtors can expect the bankruptcy trustee appointed to your case to pay in Chapters 7 and 13.
When money is available to pay creditors in bankruptcy, creditors rarely fight between themselves, although it can happen. When bankruptcy funds are available, a creditor who would like payment starts the process by filing a "proof of claim" form with the bankruptcy court.
The completed proof of claim form tells the trustee how much the debtor owes and the type of claim involved. The creditor attaches evidence of the claim's validity, usually a copy of the contract.
The payment process goes smoothly because the trustee evaluates all claim forms before determining how to disperse the funds. The trustee then pays the "proof of claims" filed by creditors according to the priority claim payment law.
The following lists the most common priority claims an individual filer can expect to encounter. Business bankruptcy filers might have more priority obligations and should consult with a bankruptcy lawyer.
All amounts apply to cases filed between April 1, 2022, and March 31, 2025.
In Chapter 7, most filers will pay priority debts after bankruptcy. In Chapter 13, you'll pay them off during the Chapter 13 case. Here are more details.
Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help.
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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.
Updated April 23, 2022