Regardless of whether you file a Chapter 7 or Chapter 13 bankruptcy, certain types of debt are not dischargeable. The so-called priority debts among these must be collected upon when the bankruptcy first closes. It is important that you have an understanding of your priority and non-priority debt when determining the type of bankruptcy that is right for you. A Bryan bankruptcy lawyer will prove very useful in this regard.
Secured and Unsecured Debt
Debts that you have incurred can be generally divided into two categories: secured and unsecured debt. Secured debts are those for which there is some sort of collateral—a car loan, mortgage, etc. If you fail to pay on such a debt, the lender has a means of recovering the loss by taking back the item that secured the loan. Hence, if you have a mortgage and fall behind on payments, the mortgage holder may file foreclosure.
Unsecured debts include such items as credit card charges, child support, taxes, and student loans. Certain types of these can be discharged in a bankruptcy – most often, credit card debts. However, other types of debt cannot be discharged. Unsecured debts are further divided into priority and non-priority debts. Priority debts must be paid before other claims.
Priority Debt Collection
Priority debts cannot be discharged, and include:
• Spousal and child support
• Most income tax
• Payroll and sales taxes
• Overpayment of any government benefits
Furthermore, if you were in an accident while intoxicated and another person was injured or died, the judgment against you in a civil personal injury case is a priority debt. When your bankruptcy closes, the trustee assigned to your case will pay these priority debts with assets you possess. Certain assets of yours may be sold for this purpose. Non-priority debts are paid with any proceeds from sales remaining after all priority debts are settled. If no funds remain after priority debts are paid, the unsecured debts are left unpaid. Your attorney can explain in detail which of your assets may be sold for this purpose.
Hire an Attorney if You Are Filing Bankruptcy
It is very important that you work with a Bryan bankruptcy attorney if you are considering bankruptcy. Your attorney will help you at every step of the process, and make sure that your rights are represented. Call Peterson Law Group today to arrange a consultation at 979-703-7014 .