Priority debt in bankruptcy refers to a specific category of debts that are given priority over other debts in the bankruptcy process. In a Chapter 7 bankruptcy, priority debts must be paid before any other debts, while in a Chapter 13 bankruptcy, priority debts must be paid in full before unsecured debts receive any payment.
Examples of priority debts include:
- Back taxes: owed to the Internal Revenue Service (IRS) or state tax agencies
- Child support and alimony: owed to a former spouse or children
- Wages and salaries: owed to employees for work performed within 180 days of filing bankruptcy
- Certain fines and penalties: owed to government agencies for criminal acts or traffic violations
- Trustee fees and administrative expenses: owed to the bankruptcy trustee for overseeing the bankruptcy case
Priority debts are not dischargeable in a Chapter 7 bankruptcy, meaning that you will still be responsible for paying these debts even if your other debts are discharged. In a Chapter 13 bankruptcy, priority debts must be paid in full through the Chapter 13 plan, but any remaining unsecured debts may be discharged at the end of the plan.
It is important to understand the priority of your debts in a bankruptcy case, as this will determine the order in which your debts will be paid and which debts will be discharged. A bankruptcy attorney can advise you on how your debts will be treated in your particular case.