When you file for bankruptcy in New Jersey, you’ll find that not all debts are alike. The court will divide your debt into two categories: priority debts and non-priority debts. You may not be able to discharge all these debts, but the court might evaluate them and figure out how to proceed.
What’s the difference between priority and non-priority debts?
Priority debts are your most “important” debts according to federal law. These are the debts that you must repay before anything else. Priority debts typically include back taxes, criminal fines, federal student loans, unpaid child support and unpaid spousal support. Most of these debts cannot be discharged. However, you might be able to get your student loans discharged in certain situations.
Non-priority debts aren’t quite as important as federal debts. This might include credit card debt, personal loans, unpaid rent, mortgages and car loans. Unlike priority debts, you might be able to discharge some of these debts during the debt relief process.
If you file for Chapter 7 bankruptcy, you’ll have to start paying off your priority debts before you try to pay anything else. If you file for Chapter 13, you’ll need to pay off your priority debts in full. As for the non-priority debts, the creditors might have to accept that you can’t pay in full. The court might discharge the rest of your non-priority debts when the process is over.
How do you settle your debts?
Most of the time, you can’t call your creditor and ask if they’ll accept a smaller amount. An attorney could help you settle with your creditors and pay off as much as possible, then discharge the rest. Once you’ve gone through the bankruptcy process, your former creditors can’t harass you or try to get you to pay off your old debts.
You can’t discharge most priority debts, but an attorney could help you figure out how to pay off these debts. Once you get these paid off, you can start focusing on your non-priority debts. You might be able to pay them off altogether if you stick to your repayment plan.