Bankruptcy is a wonderful benefit for people in Parker, Centennial, and Aurora who are facing overwhelming debt and need some support to become financially stable again. The bankruptcy process not only allows a benefit for those who are filing for bankruptcy, but allows lenders and creditors to get repaid as well. Both a Chapter 7 and Chapter 13 bankruptcy have different avenues for creditors to get at least a portion of the debts they are owed. This is part of the reason the bankruptcy trustee is assigned to every bankruptcy case. They are an impartial third party whose responsibility is to fairly disperse the payments and liquidation monies.
Who Gets Paid First? Order of Priority for a Chapter 7 or Chapter 13 Aurora Bankruptcy
While there is no specific guideline as to who exactly repaid first, the general rule is that secured creditors will be paid first and then unsecured creditors will get paid. Secured creditors are paid first because the debt is tied to some collateral, like a car or home. Other priority debts include alimony or child support payment debt and tax debts. Lowest on the priority list is unsecured creditors, like credit card debt.
Where Does the Money Come from for Repayment for a Chapter 7 and a Chapter 13 Bankruptcy?
Chapter 7 Bankruptcy – This type of bankruptcy requires a liquidation of assets. The money from the liquidation is used to pay toward debts. Often, a Chapter 7 bankruptcy will have few or no assets involved. This does not preclude someone from filing a Chapter 7 bankruptcy, though. It just means that whatever assets there are, if any, will be liquidated and distributed to secured creditors and then unsecured creditors (in that order). Any remaining debt is discharged.
Chapter 13 Bankruptcy – This type of bankruptcy requires a 3 to 5 year repayment plan. These payments are made to the bankruptcy trustee, who distributes fairly to the creditor and lenders. Like before, the secured creditors are paid first and then the unsecured. Any debt that remains after the end of the repayment plan is discharged.