How does the bankruptcy court decide which creditors will get paid?

The bankruptcy court in Indiana uses the Bankruptcy Code to decide which creditors will get paid. The Bankruptcy Code is a set of laws, overseen by the United States government, that helps people and businesses that are in debt to get a fresh start. When an individual or business files for bankruptcy, the court will assess their assets and liabilities. This helps the court decide which creditors will get paid. The court will then prioritize the creditors’ claims. The Bankruptcy Code divides creditors into classes such as secured creditors, unsecured creditors, and priority creditors. Secured creditors are those who have collateral for a loan, like a mortgage or car loan. Unsecured creditors are those who have loaned money with no collateral. Priority creditors are those who have a special legal claim to the debtor’s assets, like back taxes or child support payments. Once the court has established the priority of the creditors, it will then decide which ones will get paid and in what order. For example, secured creditors typically get paid first, followed by priority creditors, then unsecured creditors. After all the priority creditors have been paid, any remaining funds can be distributed to the unsecured creditors, if any. The court will also take into account the amount of money that the debtor has available to pay creditors. If the debtor does not have enough money to pay all their creditors, the court may grant a partial payment or take other steps to ensure that the creditors are paid what they are owed.

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How does the bankruptcy court decide which creditors will get paid?

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