What is the meaning of “priority debt”?
In Indiana, priority debt is a debt given priority status over other types of debt with priority given to certain creditors. The priority is based on the type of debt and the payment priority outlined in law. Generally, priority debt is made up of unpaid taxes, wages, and certain types of court-ordered payments, such as alimony or child support. Depending on the type of debt, priority debts may have to be paid before other types of creditors can receive payment. Tax debts are given priority status in many jurisdictions and must be paid before other types of debt. This means if a tax debt is owed, it must be paid off before any other creditor of the debtor can collect. If a debt owed to a creditor is paid when it is not a priority debt, the amount paid to a non-priority creditor could be seized to pay a priority debt. The priority status for debts can change depending on state law. For example, in some states, a mortgage debt is given a higher priority than a credit card debt. Priority status may also be dependent on the timing of the debts being entered into, with priority debts created after a certain deadline being given priority status over earlier debts. Priority debts must be paid out first before other debts can be collected, so it is important for debtors to understand which debts have priority status and how payment priority works for each type of debt. Knowing which debts have priority status can help debtors plan their finances so that they can stay on top of priority debts and avoid being in further financial difficulty.
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