The Dallas bankruptcy process is one that helps thousands of families regain control over their financial lives each year. However, there is a common thread among many filers; they don’t always know how their debts can be managed in bankruptcy. Therefore, it is important to understand the differences in type of debt and how they could be resolved in a filing.
The bankruptcy code breaks down personal debts into three categories (a) secured, (b) unsecured, and (c) priority. Secured debts are those with collateral at stake, like a mortgage or car loan. Unsecured debts do not have collateral or assets against the loan, examples include credit cards, medical bills, utility bills and the like.
The last category, priority debts, are those that have been set part by Congress as the most important for repayment in a bankruptcy. Items like tax debts, child or domestic support payments, criminal restitution payments, and wages or commissions owed to an employer are all considered priority debts. These debts carry the highest level of repayment importance in a bankruptcy filing. What this means is that any of these debts will be repaid first, prior to any remaining creditors.
In a Chapter 13 case, priority debts are those that receive payment above any other creditor until the debt has been satisfied. After this time, secured debt creditors may be paid if any funds remain; and finally any unsecured claims. In a Chapter 7 case, priority debts will be required to be repaid through any disposable income carried by the debtor or through the liquidation of non-essential assets.