Priority Debt

Not all debts are treated equally in bankruptcy. The bankruptcy code creates a hierarchy — certain debts get paid first because of their nature or public policy importance. These are called priority debts, and they jump to the front of the line when money is distributed from the bankruptcy estate.

The most common priority debts include: domestic support obligations (child support and alimony — top priority), certain employee wages owed by a business, contributions to employee benefit plans, and most importantly for individual filers, recent income taxes (generally taxes owed for the past 3 years), penalties owed to the government, and certain other government claims.

Priority status has two important implications: (1) in any case where the trustee distributes money to creditors, priority creditors get paid before general unsecured creditors; and (2) most priority debts cannot be discharged. After bankruptcy, you'll still owe these debts in full. In Chapter 13, your repayment plan must fully pay all priority debts before the plan can complete.

If a significant portion of your debt is priority debt — particularly back taxes or domestic support arrears — it affects your bankruptcy strategy. Chapter 13 can actually be very useful here: it lets you pay off priority debts over 3–5 years in a structured plan, stopping IRS collection actions and wage garnishments in the meantime.

For pure Chapter 7 filers, priority debt is a reminder that bankruptcy won't eliminate everything. If you owe substantial back taxes or child support, you should plan for those obligations to continue after your discharge. The good news: the discharge can still eliminate your other debts, freeing up income to tackle the priority obligations more effectively.