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

When a person files for bankruptcy in Maryland, their assets are used to pay back their creditors. The bankruptcy court is responsible for deciding which creditors get paid and how much they will receive. This process is called "creditor priority". The bankruptcy court looks at two factors when considering creditor priority. First, it considers the type of creditor. Some creditors, such as the IRS and child support, have priority over other debts. This means they will be repaid first. Other types of creditors, such as credit cards, are lower priority and will be paid after the higher priority debts. The second factor is the amount of money the creditor is owed. Creditors can receive partial payments, so if there are multiple creditors with the same priority, the court will decide who gets paid based on how much they are owed. The court will look at the total amount of debt owed to each creditor and decide how much each will receive. Ultimately, the bankruptcy court decides which creditors get paid based on the factors above. Creditors with high priority, like the IRS, are typically paid first, while creditors with lower priority, such as credit cards, are paid last. The court also looks at the amount of money each creditor is owed and decides how much of a partial payment each will receive.

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

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