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.
Child support payments generally cannot be discharged in bankruptcy. This means that a parent who owes child support cannot escape this duty by filing for bankruptcy. Bankruptcies do not act as a stay, or hold, on actions to establish paternity or to modify child or establish support obligations
Chapter 13 Bankruptcy Allows You to Catch Up on Missed Child Support Payments. One of the main benefits of Chapter 13 bankruptcy is that it allows you to organize your debts and pay back some or all of them through a convenient repayment plan. Any pre-bankruptcy child support arrears must be included and paid off in your Chapter 13 plan. In most cases, paying child support can actually reduce the amount you would otherwise have to pay to general unsecured creditors (such as credit card companies) through your plan. Since most debtors would rather help their children than pay credit card bills, filing for Chapter 13 bankruptcy can help you get caught up on your back child support while discharging more of your other unsecured debt.
When you file for bankruptcy, the automatic stay prohibits most creditors from collecting their debts from you. The automatic stay does not apply to certain activities relating to child support. The automatic stay does not prohibit: legal proceedings to establish or modify an order for child support, collection of child support from property that is not part of the bankruptcy estate, or income withholdings to pay child support pursuant to an administrative or court order
Failing to make child support payments on time is very serious and can have wide ranging effects including suspending your driver’s license, garnishing your wages, taking your tax refund or seizing other property, and potentially even jail time. If you are struggling with making child support payments, contact an attorney immediately to discuss your options.