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Can I choose which debts to pay off first?

Individuals that are just about to file for Chapter 13 bankruptcy may wonder how much flexibility they will have in paying their debts. You might want to prioritize paying off a house mortgage before you want to tackle a credit card bill. While Chapter 13 can help you give a fresh financial start in Tennessee, there are some steps in the bankruptcy process that you will not have a final say on, including which debts are to be paid first.

The U.S. Courts website explains that Chapter 13 filers can propose a repayment plan, though a credit counseling agency should have provided input on the plan beforehand. However, your bankruptcy court must approve the plan before it can go into effect. Also, the court will have the final say in whether some creditors will be prioritized over others, so you cannot expect to prioritize your creditors as you wish.

You can expect your bankruptcy judge to look to bankruptcy law as a guide for prioritizing your creditors. Under bankruptcy law, taxes are considered a priority debt. Priority debts are to be paid first as part of bankruptcy, which includes many taxes and the costs associated with the bankruptcy proceeding. Priority debts are also to be paid in full unless the priority debt creditor makes special provision for the claim to be treated differently. So in all likelihood, there will be some debts that you will have to pay first and down to the last cent.

To make sure your bankruptcy repayment plan is sound, consult with a bankruptcy attorney to see which debts a court is most likely to require attention to first. You will have less worry about encountering any surprises as you prepare a repayment plan to file at the bankruptcy court and decrease the possibility of having your plan rejected by a judge.

Be aware that since bankruptcy cases will greatly vary, this article should not be taken as legal advice. It is written to educate readers on Chapter 13 bankruptcy topics.

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