Many people think all the debtor's creditors get left out in the cold when someone files for bankruptcy, but that's not always the case. Money is available to pay creditors in virtually all Chapter 13 cases and some Chapter 7 cases.
But creditors don't get paid automatically. Before receiving funds, a creditor must submit a "proof of claim" to the court using an official proof of claim form. And not all creditors' debts receive the same treatment.
A priority claim is a debt entitled to special treatment and will get paid before nonpriority claims. When filling out the proof of claim form, the creditor indicates whether a priority status exists by checking "yes" in box 12.
The bankruptcy trustee—the court-appointed individual responsible for overseeing the case—will review all submitted claims. After resolving objections and confirming the plan in Chapter 13 bankruptcy, the trustee will distribute funds to priority creditors. If money remains, the trustee will pay claims without priority status.
All creditors seeking payment in a Chapter 13 case must file a claim. In a Chapter 7 case, the court will instruct creditors to submit claims if it appears to be an "asset case," meaning that money will be available for distribution. Creditors won't submit claims in a "no-asset case."
Here are examples of common priority claims:
These figures are effective as of April 1, 2025, and remain valid through March 31, 2028. (11 U.S.C. § 507(a) - current amounts are published in the Federal Register.)
Did you know Nolo has made the law accessible for over fifty years? It's true, and we wholeheartedly encourage research and learning. You can find many more helpful bankruptcy articles on Nolo's bankruptcy homepage. Information needed to complete the official downloadable bankruptcy forms is on the Department of Justice U.S. Trustee Program website.
However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.