Is there an order you must repay debts in?

 Posted on February 25, 2021 in Chapter 13 Bankruptcy

After filing for Chapter 13 bankruptcy, you have obligations to fulfill. It is important that you do this, too. If you fail to fulfill your duties as a Chapter 13 debtor, you have no second option or "fallback" bankruptcy to choose from.

Thus, it is crucial to understand what your obligations are. This includes the way your debts must be repaid, and whether or not there is an order to it.

First debts to pay off

The United States Courts discuss the basics of Chapter 13 bankruptcy, including the obligations that you have as a debtor. Of these obligations, one includes the order you repay your debts and fees in. For example, it is important that you start by paying off all filing fees accrued while filing for bankruptcy. You cannot start the process without this.

After successfully starting, you need to handle priority debts first. This includes child support, alimony payments, and missed payments to employees. In other words, debts that affect the finances of another person.

Secured and unsecured secondary debts

Next, you can tackle all other secured debts. This includes any liens you may have. After that, you move on to unsecured creditors. You must pay them an amount equal to your nonexempt property. Debts that fall under this category include medical bills, union dues and credit card charges.

Note that while this is happening, your secured debts need to stay current. This means continuing to pay mortgages, personal loans and home equity loans. As you can see, you need to pay quite a lot during Chapter 13 bankruptcy. That is why it is crucial to make a plan that you can actually stick to.