What are Priority Claims?

filing a bankruptcyFederal bankruptcy policies are in place to help those who are drowning in debt and need a new start. Filing for bankruptcy can provide relief from financial anxiety and debt collectors, but it can also come with a high price tag.

Either way, filing for bankruptcy with the help of Brooklyn bankruptcy lawyers results in the cancellation of the majority, if not all, of your outstanding debt. However, certain types of debts, such as priority debts, cannot be forgiven or discharged during bankruptcy.

A priority claim receives preferential consideration and must be addressed before non-priority claims. The creditor will indicate the priority status of a claim while filling out the evidence of claim form.

Examples of priority claims include:

  • Child and spousal support obligations
  • Criminal charges/fines
  • Unpaid government taxes
  • Administrative expenses
  • Customer deposit claims
  • Employee benefit plan claims.
  • Federal student loans

Federally student loans are a particular case of priority debt. They cannot be forgiven immediately by bankruptcy as non-priority claims. Still, they can be discharged by a different process known as Adversary proceeding (AP) filed in connection with a bankruptcy petition. To have your student loan debt forgiven in this way, you must have a good Bankruptcy Attorney in Brooklyn to show that you made a good faith commitment to repay the loan and that you or your dependents would experience hardship if you are forced to repay it. Unlike traditional bankruptcy proceedings, where creditors are not present in court, the lender can testify at an adversary proceeding to contest the claims.

The Process and how a bankruptcy attorney in Brooklyn can help

If there are sufficient assets to repay all debt obligations in a Chapter 7 bankruptcy, creditors with more substantial claims receive payments before those with weaker claims. On the other hand, in chapter 13 bankruptcy, creditors with stronger claims can obtain a greater percentage of the amount owed to them than creditors with weaker claims.

When a bankruptcy filer’s assets are sold in a Chapter 7 bankruptcy, the funds must be used to pay off priority claims before all other creditors are paid. When a Chapter 13 bankruptcy debt recovery plan is devised, creditors with priority debts are usually compensated in full, whereas those with non-priority debts will have to receive partial payment.

If you apply for Chapter 7 or Chapter 13, after the process is completed and you’ve fulfilled the court’s conditions, the majority of the outstanding debts are deemed discharged. You are no longer liable for them, and creditors are no longer able to sue you or recover them in some other way. On the other hand, priority claims cannot be forgiven, and you would be liable for repaying them even when the other debts have been discharged.

Filing for bankruptcy is a serious decision that can not be taken lightly. If you’re contemplating filing for bankruptcy and aren’t sure whether to file Chapter 7 or Chapter 13, it’s prudent to go through your debts and see which are priorities and which aren’t, and which can and which can’t be discharged. Consulting with a bankruptcy lawyer in Brooklyn and financial professionals will also help you understand the differences and evaluate your position if you want to move forward with filing.

At Ursulova Law, we’re your trusted Bankruptcy Lawyer Brooklyn, and we’ve been serving the residents of New York for decades, providing high-quality legal assistance. We have a team of reputable Brooklyn bankruptcy attorneys that can help you through your bankruptcy filing process. Call our Ursulova Law Offices at  (718) 336-7000 to consult with a bankruptcy attorney Brooklyn today.

Ursulova Law offices, P.C.

Contact Ursulova Law Offices, P.C. to find out how our NY Bankruptcy Attorneys can help you today. Our offices are located in New York, Brighton Beach, Brooklyn and Garden City.


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