Priority debts are largely unaffected by a Chapter 7 case--it does not discharge them, so you need to pay them after finishing your case.
One of the most important aspects of bankruptcy is that all debts are not equal. "Priority" debts are treated special in a number of ways.
Often all your debts are discharged--legally written off--in Chapter 7. But some you might want to pay, or might not be able to discharge.
You pay your general unsecured debts only as much as you can afford during a Chapter 13 plan, with the rest then legally written off forever.
Your debts are either secured by something you own, or they are unsecured. Unsecured debts are either "priority" or "general unsecured."
Chapter 13 can work much better than Chapter 7 if you have a judgment or HOA lien on your home, or get behind on child or spousal support.
Here are 3 more scenarios for when you are current on your mortgage, where Chapter 7 works well in dealing with other home-related debts.
Very broadly speaking Chapter 7 handles simple debts as well or better than Chapter 13 does, which handles more difficult debts better.
You can put a "preferential payment" to work for you if you owe a "priority" debt--back child or spousal support, or recent income taxes.
Priority proofs of claim need to be carefully monitored in a Chapter 13 case. Make sure one's filed so it gets paid, and at the right amount.
During the last 13 blog posts we've covered the automatic stay--crucial protection that filing bankruptcy gives you. Here's a helpful summary.
Even if you file bankruptcy, certain actions can still be taken against you in divorce court, or about family law matters.
A bankruptcy trustee would pay your "priority" debts ahead of other debts in an "asset case." But what happens in a "no asset case"?
Here's what happens to "priority" debts in an "asset case."
What makes "priority" debts so special?