NJ Bankruptcy Attorney Explains The Classification of Priority Debt

Priority debt is classified as priority by the bankruptcy code.

Any claim that is classified as priority is not dischargeable or eliminated in a chapter 13 or chapter 7 case. Typically, priority debt include, but are not limited to, the following:

• certain types of taxes;
• child and/or spousal support;
• alimony;
• administrative fees such as trustee or other professional’s fees;
• certain types of debt due to a governmental entity.

Typically, in a chapter 13, priority debt must be paid, in full, through the bankruptcy plan. This means that any priority debt that is due at the time of the chapter 13 bankruptcy filing must be paid through the monthly trustee payments. Please note that any chapter 13 debtor who is obligated to pay ongoing support / alimony, is required to keep current with these monthly payments during the entire bankruptcy plan, as well.

The reason for the chapter 13 case filing does not effect the requirement that all priority debt must be paid through the plan. For example, a debtor who filed for bankruptcy to save a house may require a monthly trustee payment of $800.00 to cure their mortgage arrears. If this same person owes substantial alimony debt requiring an additional amount of $500.00 monthly, the debtor must pay a $1,300.00 trustee payment. If the person is unable to pay $1,300.00 monthly, they will be unable to proceed with the case and save their house.

A debtor may not eliminate or discharge priority debt in a chapter 7. This means that the debtor will continue to be liable for the priority debt after he receives the court discharge order that completes the case. The bankruptcy laws do not require the debtor to make an immediate payment on the priority debt. However, after the chapter 7 case is completed, the priority creditor is permitted to pursue the debtor for the entire amount, as though the debtor never filed for bankruptcy protection.

Contact a New Jersey Bankruptcy Lawyer

Filing for bankruptcy is an important decision to make and should not be made without first consulting a skilled and experienced bankruptcy lawyer. Attorney Robert Manchel, has been helping families seek brighter futures with bankruptcy for many years. Contact the New Jersey bankruptcy lawyers for a free consultation.