Updated March 12, 2019
Many people think that when someone files for bankruptcy, all of the debtor’s creditors get left out in the cold. That’s not always the case. In virtually all Chapter 13 cases, and some Chapter 7 cases, money is available to pay creditors.
And not all creditors’ debts receive the same treatment, either. A priority claim is a debt that is entitled to special treatment and will get paid before nonpriority claims. When filling out the proof of claim form, the creditor will indicate a claim’s priority status by checking “yes” in box 12. (For an overview of the different claims, read Types of Creditor Claims in Bankruptcy: Secured, Unsecured & Priority.)
The bankruptcy trustee—the court-appointed individual responsible for overseeing the case—will review all submitted claims. After the resolution of any objections (and the confirmation of a plan in a Chapter 13 case), the trustee will distribute funds to priority creditors. If money remains, the trustee will pay claims without priority status.
Here are examples of common priority claims:
These figures are effective as of April 1, 2019, and should remain valid through March 31, 2022.
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 that the case is an “asset case,” meaning that money will be available for distribution. By contrast, creditors won’t submit claims in a “no asset case.” For additional information, read Priority Debts in Chapter 7 Bankruptcy.