What is the meaning of “priority debt”?
Priority debt is a term used to describe a type of debt which is given special priority when creditors are paid in the event of an insolvency or bankruptcy. In North Carolina, priority debts are typically protected under state creditors rights law. Priority debts are those which are most important to pay, such as taxes, wages, alimony, and child support. These debts usually take precedence over other debts, such as credit cards, mortgages, car loans, and medical bills, when a debtor is insolvent or files for bankruptcy. This means that priority debts will be paid off first from the debtor’s available assets. Priority debts are considered to be more important because they are deemed necessary for the protection of individuals or the public at large, and so should be paid off first. Creditors usually have to go through the court system in order to seek payments from priority debtors. If a judgment is received, the amount owed may be taken from the debtor’s wages, bank accounts, or other assets until the debt is completely paid off.
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