One of the most important questions that arise when deciding whether to file for bankruptcy is: which debts will get wiped out? Specifically, many people want to know what happens to a child support obligation when they file for bankruptcy.
Generally speaking, “domestic support” obligations of this kind are typically excluded from a bankruptcy proceeding and continue to be owed once the proceeding is complete. Here are a few more questions to consider.
Will Chapter 7 Bankruptcy wipe out my child support obligations?
No. Child support obligations are considered “priority debt” under the Federal Bankruptcy Code, and as such they are eligible for discharge through Chapter 7 bankruptcy. Any money owed prior to the bankruptcy proceeding will continue to be owed after it’s completion, on top of any additional ongoing payments toward this obligation.
Can I stop making child support payments when I file for Chapter 7 Bankruptcy?
No. While the initiation of bankruptcy proceedings does result in an “automatic stay” on all attempts from creditors to recover a debt, child support is excluded from this stay and must continue to be paid throughout the proceeding. Importantly, any income earned after the start of the bankruptcy proceeding is not considered to be part of the “bankruptcy estate,” and so a lawsuit to recover child support obligations may be filed to go after these earnings even while the bankruptcy proceeding is still taking place.
Will a child support debt receive any money from a Chapter 7 Bankruptcy?
It’s possible. As a priority debt, past due child support will be first in line to receive any money from the bankruptcy estate. However, it should be noted that a large percentage of Chapter 7 filings do not actually result in any assets being gathered by the trustee for distribution, because the individual filing for bankruptcy does not have any assets to contribute. If there is nothing in the bankruptcy estate to distribute, then nothing will go toward the child support debt. However, this does not mean that the debt is discharged.
Are there any benefits to filing Chapter 7 if I owe child support debt?
Yes. While this specific debt is not eligible to be discharged through bankruptcy, filing for Chapter 7 may give an individual the opportunity to free up funds to pay for this debt by discharging other eligible debts. An experienced bankruptcy attorney can help determine whether this is the best strategy based on their client’s specific financial circumstances.