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Priority Claims in Bankruptcy

Bankruptcy has a priority for claims. Individuals filing for bankruptcy will have claims that are included in a repayment plan based on where the claim falls on the priority list. Any claims for debts to spouses or children for court ordered support are always the highest priority of a claim. Priority claims in bankruptcy often lead to questions like the ones answered below.

How does an individual determine the priority of a claim against a debtor?

Money held in a bankruptcy estate is used to pay unsecured claims is the bankruptcy case. Priority refers to the order in which they are paid. Higher priority claims are paid in full before lower priority claims receive anything.

The priority of payment as set out in 11USC 507 are as follows:
• Claims for debts to spouse or children for court ordered support
• Administrative expenses of the bankruptcy
• Unsecured, post-petition claims in an involuntary case
• Wage claims of employees and independent salespersons up to $10,000 per claim
• Contributions to employee benefit plans up to $10,000 per employee
• Claims of farmers and fishermen against debtors operating storage or processing facilities
• Layaway claims of individuals who didn't get the item they made the deposit on
• Recent income, sales, employment or gross receipts taxes

There is no indication of a lien placed on any of my assets resulting from a default judgment. Is a default judgment considered a secured claim, a priority claim, or an unsecured claim?

A default judgment is an unsecured claim but can change to a secured claim. The default judgment will become a secured claim once a writ of execution is issued and a lien is attached to property.

If a debt is determined to be dischargeable in a chapter 13 bankruptcy does the debt have to be included in the payment plan or is it simply still owed to the creditor?

Debt is dischargeable when all payments have been made in a Chapter 13 bankruptcy plan. Unsecured debt does not have to be included in the payment plan. It will only be included if there is enough money left in the bankruptcy estate after paying secured debts and priority claims.

In some cases of Chapter 13 bankruptcy unsecured debts are not paid at all. Some cases they are paid only partially and yet in others they are paid in full. But in all cases unsecured debts are discharged if the plan is completed.

Where does a leased vehicle fall in the priority of claims in a bankruptcy?

In most cases, a vehicle lease cannot be included in a Chapter 13 bankruptcy repayment plan. The lease would be paid outside of the plan.

If the decision is made to not keep the vehicle then the creditor will take back possession of the vehicle. The creditor will then sell the vehicle and apply the money to the balance of the loan. Any amount still owed on the balance of the loan is generally discharged as it would then be classified as an unsecured debt.

Having the right information and understanding of priority claims can help when dealing with questions regarding bankruptcy. Experts can help answer questions about the priority of claims or what priority claims are secured or unsecured. Get the answers fast and affordably by asking an Expert online.
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Recent Priority Claims Questions

  • I am in the middle of a bitter bankruptcy. I field because

    ONLY ROGER ANSWER THIS PLEASE-I am in the middle of a bitter bankruptcy. I field because the old owner of the company sold me a lemon and I do not have enough money to pay the money I owe him which is around 1 million dollars. I have owned the company 3 years and still have not taken a salary. Anyway, my lawyers are inept (u get what u pay for!). I owe the union $300,000 of priority claims plus another $600,000 of unsecured claims. I own the old owner $1,000,000 totally unsecured. Can i put a plan together to pay the union 20 or 30 cents on the dollar for their priority claim and not pay any of the unsecured parts? The union will vote yes, they just want the membership. I WANT ROGER TO ANSWER THIS QUESTION-NOBODY ELSE PLEASE

  • I am in the middle of a bitter bankruptcy. I field because

    I am in the middle of a bitter bankruptcy. I field because the old owner of the company sold me a lemon and I do not have enough money to pay the money I owe him which is around 1 million dollars. I have owned the company 3 years and still have not taken a salary. Anyway, my lawyers are inept (u get what u pay for!). I owe the union $300,000 of priority claims plus another $600,000 of unsecured claims. I own the old owner $1,000,000 totally unsecured. Can i put a plan together to pay the union 20 or 30 cents on the dollar for their priority claim and not pay any of the unsecured parts? The union will vote yes, they just want the membership.
  • I filed for bankruptcy in March. I have a wholesale suit factory

    I filed for bankruptcy in March. I have a wholesale suit factory in Queens NY. I bought the business in Jan 2011 as 2 seperate corporations (it was set up that way 30 years ago). One of the corps had union workers and the other non union workers. About a year ago the union sued me and won claiming that all workers should be in the union. Health insurance is $600 per employee times th4 30 non union employees so I filed for bankruptcy. My labor lawyer told me everything would be dischargable but the union filed that the health benefits due to employees 6 months prior to filing are priority claims and need to be paid in full to exit.

    What I am wondering is can I withdraw the bankruptcy? I have no real assets, I have some equipment etc but I can probably get somebody to file legit UCC-1's. I cant get out of bankrupcy by paying the priority/admin claims, it is over $400k.

    What to do?
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