When you prepare to file bankruptcy protection, your bankruptcy attorney may ask you to categorize your debt into secured, unsecured, and priority debts. This helps the bankruptcy court determine what debts can be eliminated, what debts you must repay to creditors, and what responsibilities you have if you want to keep certain property. Today’s blog from Groce & DeArmon, the top bankruptcy attorneys in Springfield, Missouri, discusses priority debts in bankruptcy.
Priority Debt Examples
Creditors get priority treatment in bankruptcy if money is owed to the government, or it is in the interest of the public good. Most, but not all, priority debts are unsecured, meaning you cannot sell property to alleviate a debt directly.
Examples of priority debt include, but are not limited to:
- Child support
- Spousal support
- Payroll taxes and sales taxes
- Certain income taxes
- Criminal fines
- Personal injury or death award due to drug or alcohol intoxication
If you’re a corporation and you have debts to pay, priority debts may include:
- Wages, salaries, and commissions owed by an employer up to $13,650 per person earned within 180 days of the bankruptcy filing
- Contributions to employee benefit plans rendered within 180 days of your bankruptcy filing up to $13,650
- Debts of up to $6,725 owed to certain fishermen and farmers
The bankruptcy attorneys at Groce & DeArmon, P.C., can help you navigate priority debts when you file for bankruptcy protection.
How Trustees Pay Priority Debts in Bankruptcy
In Chapter 7 bankruptcy, secured debts may be paid off through the sale of property. The proceeds of the sales are used to pay off secured debts, such as a home or car loan. Any leftover proceeds can go to paying off or paying down priority debts.
For example, you have a $3,000 secured debt on a car loan in Chapter 7 bankruptcy. The trustee sells your vehicle for $5,000. The remaining $2,000 can go to pay down your child support debt of $2,500. Now, you only have $500 left to pay on the child support.
Priority debts in Chapter 13 bankruptcy work a bit differently. Rather than using property sales to pay for priority debts, the trustee reorganizes your debts so you can pay them off with lower monthly payments. You will probably incur interest with each priority debt until it’s paid off.
Groce & DeArmon: Top Springfield Bankruptcy Attorneys
The bankruptcy attorneys at Groce & DeArmon help you navigate priority debts in either Chapter 7 or Chapter 13 filings. We understand that the decision to file bankruptcy is difficult, and we’re here to make this challenging time as easy as possible. Contact Groce & DeArmon online or call toll-free 1-800-640-3706 for more information.