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Do damages or liabilities resulted from a civil lawsuit considered

as priority debts in chapter...
Do damages or liabilities resulted from a civil lawsuit considered as priority debts in chapter 13? Or does it depend on the nature of the lawsuit?
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Answered in 1 minute by:
12/6/2012
WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 17,253
Experience: 14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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WALLSTREETESQ :

Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarificati on,

WALLSTREETESQ :

Civil damages in most cases would not be priority debts, unless they are for fraud, or are federal civil sanctions.

WALLSTREETESQ :

Priority debt is a debt that is generally non-dischargeable. Typically, it is money owed either to a governmental-type agency or the writers of the U.S. Bankruptcy Code felt that discharging these kinds of debt would violate public policy. Examples of priority debt include child or spousal support, most taxes (exceptions apply) and criminal fines/restitution. For everything except child or spousal support, there are sub-categories and technicalities which may make these kinds of debts dischargeable. But, mostly, these priority debts survive a bankruptcy and the person remains responsible to pay them. An attorney can help figure out which debts are going to survive the bankruptcy discharge and which debts will be discharged.

WALLSTREETESQ :

In your situation, you would list the Plaintiff who won an award as a creditor, and his judgment as an unsecured debt.

Customer:

oh ok, I'm the defendant in the case and the plaintiff is the IBEW(local union), they filed a complaint with the court to collect the unpaid 'contribution fund'.

Customer:

I was told by my attorney that 'contribution fund' gets treated the same as 'wage' therefore it must be paid in full even if I file bankruptcy

Customer:

the court scheduled a mediation in late Jan. ,should I wait until after mediation to start filing?

WALLSTREETESQ :

Wages are priority debts,

WALLSTREETESQ :

For employees who are no longer employed, they are typically paid just like claims to all other creditors - EXCEPT: the first $11,725 due are treated as priority claims, See 11 U.S.C Section 507(a)(4)

WALLSTREETESQ :

Wages can be discharged, in some instances, if you filed a chapter 7 or 11 that may be the case,

Customer:

oh, ok

WALLSTREETESQ :

in a chapter 13, which is a personal bankruptcy, they would have to be paid in your plan.

WALLSTREETESQ :

If you filed a chapter 11, it is possible that it would be discharged to some extent.

Customer:

does a sole proprietorship quality for chapter 11?

WALLSTREETESQ :

You should not file until mediation is final, as you can know how much your debt is.

WALLSTREETESQ :

Yes, also any corporation can file a chapter 11

Customer:

so I should start filing now?

Customer:

I'm just hoping to bring the total amount down after mediation. Since I need to pay them anyways.

WALLSTREETESQ :

Under Chapter 11 reorganization, the employer has basically asked the court to assist with a repayment schedule and/or selling off company assets as a means of raising money to pay off creditors. A reorganization under Chapter 11 normally means the company will continue normal business operations under the protection of the court until the time it is able to resolve its financial affairs. The filing of Chapter 11 reorganization should have no direct impact on payment of employee wages.



Under Chapter 7 liquidation, the company is informing the court it is no longer able to meet its financial obligation to creditors and is dissolving the business. With Chapter 7 liquidation, the bank will prioritize creditors into the order in which they are to be paid off. Under this classification of bankruptcy, when a company owes employees wages, the employees then become creditors of the bankrupt company. As with other creditors, employees who are owed wages share in the remaining assets of bankrupt employer.



With the exception of secured creditors, which are typically given the highest priority for repayment, creditors that are owed wages, salaries or commissions are given a higher priority for repayment than other creditors. Each individual employee of a bankrupt employer is given a priority of $10,000 (adjusted to inflation every 36 months) of all wages, salaries or commissions he or she earned up to 180 days prior to the company filing for bankruptcy. In some cases, there will be sufficient assets to satisfy employee claims in full; in others, employees may be compensated for only a portion of their claims or receive nothing at all.

WALLSTREETESQ :

I would wait till after mediation to find out the exact amount you owe, and to decide if you can file a chapter 11 or even file a chapter 7 to discharge the debt

Customer:

ok, thanks for the information

WALLSTREETESQ :

Good luck, and if you have any further questions please do not hesitate to ask.

Customer:

how about unsecured debts?

WALLSTREETESQ :

Unsecured debts, can be discharged in full in most cases,

WALLSTREETESQ :

in a chapter 13, you may have to pay them in a payment plan, also in a chapter 11

Customer:

but do I have to pay in full?

Customer:

or can I work out a deal with them and pay according to the payment plan?

WALLSTREETESQ :

In a chapter 11 and chapter 13, you would be able to work out a payment plan, and reduce if not discharge most of the unsecured debts,

WALLSTREETESQ :

Typically secured and priority debts have to be paid first, the rest will only receive what is left over if anything

Customer:

but secured and priority debts can be paid according to a payment plan, correct?

WALLSTREETESQ :

yes

Customer:

ok, just making sure, I'm just worried that I need to make a full one-time payment.

WALLSTREETESQ :

no, a chapter 13 creates a 60 month payment plan,

WALLSTREETESQ :

a chapter 11 also creates a plan that is fairly long

Customer:

ok

WALLSTREETESQ :

If you have any further questions please do not hesitate to ask.

WALLSTREETESQ :

If satisfied with our service please provide us with positive feedback.

WALLSTREETESQ :

good lcuk

WALLSTREETESQ :

luck

WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 17,253
Experience: 14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
Verified
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WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 17,253
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Experience: 14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS

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