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

The bankruptcy court uses a process called a “priority of payment” to decide which creditors will get paid. The court looks at all of the creditors and reviews their claims to determine which come first. Different types of creditors have different priority levels. In Kansas, priority of payment is determined by the Bankruptcy Code. Secured creditors such as mortgage lenders, auto loan lenders, and other lenders with collateral get priority for payment. These creditors can use their collateral to secure repayment and are at the top of the priority list. Unsecured creditors such as credit card companies, medical providers, and other similar creditors rank lower on the priority list. Since these creditors do not have collateral to use for payment, they must wait until the secured creditors have been paid. Priority creditors, which include domestic support obligations, taxes, and other specific requirements, have a higher priority than the unsecured creditors. The court must ensure that these debts are paid before other creditors. Finally, any funds remaining after priority creditors are paid should be split among the remaining creditors. The court will calculate the individual amounts for each creditor, with the highest priority creditors receiving their payments first. By sorting creditors into priority categories, the bankruptcy court can ensure that creditors are paid fairly and in the right order. The priority of payment helps to protect both creditors and debtors during the bankruptcy process.

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

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