The two main types of debt in bankruptcy have been categorized by their relation to any collateral, secured for those tied against an asset and unsecured for those that are not tied to any assets. However, this distinction doesn’t encompass the full nature of the debt obligation. In order to better serve the loan holder, the bankruptcy process has broken down debts into a third categorization; priority debts.
Head Of The Line
Priority debts can be either unsecured or secure debts, but are defined by their designation of importance for repayment. This means that the bankruptcy court deems these debts as either ineligible for a discharge altogether or only to be included in a Chapter 13 repayment plan. Further, these debts are the first of any other debts (like a credit card or medical bill) to receive payment in a Chapter 13 plan.
Common examples of a priority debt include domestic support payments, criminal restitution, student loans and tax debts. Failure to complete the Chapter 13 payment or court appointed plan for satisfying these debts can result in a dismissal of your case. While many of these debts are not eligible for a discharge, there are some instances in which the court will grant an exception in the event of undue burden. However, it is best to consult with a Dayton bankruptcy attorney before filing for bankruptcy if carrying any one of these priority debts.