When spouses obtain a divorce, one spouse may be ordered to make child support payments to the other. A spouse who is unable to meet financial obligations may file for bankruptcy. If a court approves the filing, the individual’s debts may be discharged (canceled) or reorganized. Child support obligations, however, are not discharged. These obligations must still be paid.
- What is a Petition for Bankruptcy?
- Can Past-Due Child Support be Discharged in Bankruptcy?
- What is the Effect of Filing a Bankruptcy Petition on Child Support?
- What Priority Does Payment of Child Support Have?
- Are there Advantages to Filing One Kind of Bankruptcy Petition Over Another?
- Do I Need a Lawyer for Bankruptcy-Related Child Support Issues?
An individual who is in debt may attempt to improve their financial situation by filing a bankruptcy petition. A bankruptcy petition is a series of documents filed with a bankruptcy court. The person filing the petition is known as the petitioner. In the petition, the person lists their assets and liabilities (debts owed to others). The petitioner, if the court determines their income is below a certain threshold, is discharged from some or all of these debts. This means the person is not required to pay them.
Generally, the court looks at whether a person satisfies a “means test.” This test was developed by the U.S. Congress. The test looks at whether a person’s income is low enough that the income is not likely to pay enough of their debt. If the person “passes,” they are eligible for Chapter 7 bankruptcy. This type of bankruptcy allows someone to eliminate as much debt as the law permits.
In contrast, a Chapter 13 bankruptcy provides for a reorganization of debts rather than an elimination of debts. In a chapter 13 bankruptcy, the court provides for a repayment plan that an individual must follow.
Under the U.S. bankruptcy laws, child support is considered a “non-dischargeable” debt. This is the case in both Chapter 7 and Chapter 13 proceedings. A non-dischargeable debt is one a person is still responsible for paying, even after successfully filing for bankruptcy.
Chapter 7 proceedings do not erase past child support obligations. These obligations must still be paid in full after the Chapter 7 proceeding is over.
Under Chapter 13, a person who cannot complete a repayment plan may request what is called a hardship discharge. Even if a court grants this request, past-due child support must still be paid.
When an individual files a bankruptcy petition, the bankruptcy court issues what is called an automatic stay. During this stay, collection activities generally must cease. The stay remains in effect until a court decides to lift, or remove it. In a chapter 7 bankruptcy proceeding, the automatic stay remains in effect until the debtor is discharged. In a chapter 13 proceedings, the automatic stay operates over a period of time, usually 3 to 5 years.
A Chapter 7 bankruptcy stay does not stay proceedings to establish whether child support is due. Proceedings to modify child support orders are not stayed either. In addition, the stay does not prevent the spouse owed support from collecting that support from money a person obtained after filing for bankruptcy.
Under Chapter 13, a noncustodial spouse may attempt to establish child support during the stay. The spouse may try to collect child support from earnings made after the Chapter 13 filing. In addition, during a Chapter 13 stay, a court can still issue wage garnishment orders. These orders require employers to withhold a portion of a debtor’s income to pay child support.
In Chapter 7 proceedings, and in Chapter 13 proceedings, payment of child support is given a special priority. Child support payments have a priority of distribution. This means that, after the expenses of the bankruptcy court and secured creditors are paid, child support payments are paid next.
Child support payments are given priority over tax payments, and obligations that are not secure.This special priority is given to government bodies (e.g., child welfare agencies) as well as to spouses entitled to child support. If the government is owed money because it provides for the child’s care, the government receives the same priority of distribution as the custodial parent does.
Chapter 13 offers some advantages to a debtor in terms of child support payment obligations. Chapter 13 requires regular payment of child support during the bankruptcy proceedings. In Chapter 13, child support that is past due is included in the repayment plan the debtor must follow.
In a repayment plan, payments are made on a monthly basis.This allows an individual to “catch up” on past child support payments. In contrast, Chapter 7 offers no “catch up” opportunity. Child support that is owed is simply given priority of distribution.
If a parent who owes child support seeks to file for bankruptcy, that parent should seek the advice of a child support attorney in their area. This attorney can advise the parent as to their child support obligations. The attorney can represent the parent at child support hearings.
In addition, the parent may also wish to hire an experienced bankruptcy attorney. This attorney can advise the parent as to what kinds of filing options are available, and can represent the parent in bankruptcy proceedings.