Priority Claim in Bankruptcy

: Chris Lee Law Firm

  Filed under: Debt

Claim formIf you get behind in your debt, some creditors can seize the property that is used as collateral and sell it to recover some of the debt. Unsecured debt, however, such as credit cards, loans, and medical bills are harder for the creditor to recover any debt owed.

When you file for bankruptcy, you provide a list of all your creditors, secured and unsecured. The court will then notify your creditors so they can file a claim in an attempt to get paid from the bankruptcy estate. An automatic stay will also go into effect, and your creditors are legally required to stop trying to collect any debt from you.

Priority Claim

When a priority claim comes into effect during the bankruptcy process, the trustee distributes the money from the estate to creditors with priority claim status first.

When paying from the debtor’s assets, first paid are the bankruptcy administrators, then top priority debt like child support, alimony, and taxes. Next paid is priority unsecured debt then, non-priority unsecured creditors if there is any money left over.

Proof of Claim

Your creditors will fill out a form called the Proof of Claim and file it with the bankruptcy court to register the debt owed. They must list the amount owed, date of the bankruptcy filing and if it is a priority claim or not. If your creditors fail to file the claim, they will not be included in the payout.

When the Trustee receives the claim, they will notify the creditor if the estate will pay the debt or reject it the claim.

Reasons for rejection of the claim are:

  • The amount of the claim is in dispute
  • The creditor is claiming a higher priority than they are entitled to
  • Didn’t file in time for the deadline

If you have more questions about Proof of Claim and how your creditors will be paid, or if you are considering bankruptcy, contact a Plano bankruptcy attorney.


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