Throughout the proceedings for bankruptcy in NYC, you’ll hear lawyers and trustees refer to priority claims and taxes. It is apparent from these conversations and occasionally debates, that the determination of priority versus non-priority is important for the court and creditors. In fact, the trustee taking your case could spend substantial time reviewing your finances to determine what priority claims you repay.
As this process unfolds, are wondering exactly what priority means for bankruptcy in NYC? Keep reading.
All Creditors Make Claims in an NYC Bankruptcy
Bankruptcy in NYC is driven by process and procedure. For example, the bankruptcy court strictly enforces timing requirements. The failure to meet deadlines can result in dismissal of your bankruptcy case. Another crucial process for bankruptcy in NYC is only repaying debts according to a Chapter 13 repayment plan or through liquidation of assets if filing under Chapter 7. Unapproved and unauthorized repayment of debts after filing for bankruptcy is illegal.
The bankruptcy trustee is appointed by the court to oversee and direct the repayment of creditors in a bankruptcy case. To be considered for repayment, a creditor must submit a claim. In the context of bankruptcy in NYC, a claim is any request for repayment.
Failure to file a claim means the creditor won’t receive any payment from the bankruptcy estate. There is only one exception. When there are no assets to liquidate in a Chapter 7 bankruptcy in NYC, and therefore no funds to distribute, creditors are not required to file a claim with the bankruptcy court.
As with all the other procedures outlined above, creditor claims must adhere to the rules of federal bankruptcy. For instance, all claims in Chapter 7 or Chapter 13 bankruptcy in NYC must be filed within 70 days of the bankruptcy petition. A claim must also have proof of a claim accompany the request for repayment. Proof of a claim should tell the bankruptcy trustee how much is owed to that creditor and whether the debt is secured or unsecured.
Claims Are Collected, the Trustee Determines Repayment
Based on the information provided in the proof of a claim, the bankruptcy trustee then determines how much money each creditor should receive. Of course, the trustee doesn’t make this decision at random or by chance. The creditors repaid through bankruptcy in NYC and how much is repaid is determined by priority.
The bankruptcy allocates payments to any and all priority claims first. These claims are repaid, often in full, before any non-priority claims are assessed and allocated funds from the bankruptcy estate. Some examples of priority claims include outstanding child and spousal support payments, income and other taxes owed to the federal government, taxes owed to the state or local government, and unpaid criminal fines.
In contrast, the bulk of outstanding obligations at issue in a bankruptcy in NYC are non-priority claims. Credit card debt, unpaid medical bills, student loans, and other personal loans are all types of non-priority claims. In most instances, these non-priority claims are also the debts discharged at the conclusion of Chapter 7 or Chapter 13 bankruptcy in NYC.
Paying the Cost of a Bankruptcy in NYC
The administrative costs of bankruptcy in NYC are also priority claims. The bankruptcy trustee is required to allocate funds in the bankruptcy estate to cover attorney fees, trustee fees, court costs, the costs of administering the bankruptcy estate, and other expenses of bankruptcy. In fact, these costs receive first priority for repayment in any bankruptcy.
Want to better understand priority claims and the order of repayment during an NYC bankruptcy? You can schedule a free initial consultation with our legal team at the Law Office of Michelle Labayen.
Our top NYC bankruptcy law firm offers a free initial consultation to any potential client. This initial consultation is cost-free and commitment-free. You don’t need to sign an engagement letter or hire our firm before coming into the office. No matter what, your initial consultation at the Law Office of Michelle Labayen is entirely confidential. So, if you have questions about priority or other procedures in bankruptcy, contact us at (212) 381-6083.