How Bankruptcy Affects Child Support

With rising expenses, debtors owing child support may consider filing for bankruptcy. Here are the effects bankruptcy has on child support.

While bankruptcy frees debtors of certain fees, child support can never be discharged. Filing for bankruptcy, however, can make paying off child support significantly easier.

Kinds Of Bankruptcy

Six different types of bankruptcies exist, each of which has distinct policies and procedures. The two most common individual bankruptcies are Chapter 7 and Chapter 13.

Here is a simplified description of each:

Chapter 7 bankruptcy

This is also referred to as liquidation or straight bankruptcy. A court-appointed trustee oversees the liquidation of the debtor’s assets to pay off to creditors. Any remaining unsecured debt, such as credit cards or medical bills, is typically erased. Chapter 7 bankruptcy does not include child support payments. A person can only file for Chapter 7 bankruptcy if the court decides they don’t make enough money to pay back the debt. The court’s decision is based on the means test, which compares the filer’s income to the state average and considers their finances to see if they have the disposable income to pay back a decent amount of money owed to creditors. If their income ends up being too low, they may qualify for Chapter 7 bankruptcy.

When filing for Chapter 7 bankruptcy, attending a meeting of the creditors is necessary. In this meeting, the creditors will ask various questions about the debtor’s financial situation. In cases of Chapter 7 bankruptcy, child support is among the first debts to be paid back.

Chapter 13 bankruptcy

While Chapter 7 forgives debt, Chapter 13 reorganizes it. The court approves a monthly payment plan so a portion of the unsecured debt and all of the secured debt can be paid off over a period of three to five years. Monthly payment amounts depend on income and the amount of debt accumulated. Anyone can file for Chapter 13 bankruptcy as long as their unsecured debt is less than $419,275 and their secured debt is less than $1,257,850.
Chapter 13 bankruptcy stays on the credit report for seven years, and one cannot file for it again until after two years. The repayment plan should also include paying off owed child support.

What About the Automatic Stay?

While filing for Chapter 7 or Chapter 13 bankruptcy puts an automatic stay in place, providing a break from collection companies, child support collection actions against can continue. Likewise, legal actions seeking to establish a child support order can also continue.

Effects On Child Support in Chapter 7 Bankruptcy

Income earned after a Chapter 7 filing may be used to determine financial obligation for child support. The courts may require that income be used on back child support payments owed to the other parent.

Effects On Child Support in Chapter 13 Bankruptcy

A chapter 13 filing includes earned income in the bankruptcy estate, meaning if one earns more while they are in the middle of their debt repayment plan, they may have to pay back more of their debts.

Financial Difficulties And Child Support

A parent may request a child support modification to the original order if they experience a significant and long-term change in income. Filing does not cancel out parental responsibility to make timely child support payments. The judge may modify the child support order in the case of excruciating events such as a pay cut or a layoff.

What is the Best Way To Proceed With Declaring Bankruptcy?

Filing bankrupt and child support modifications may be a difficult and nuanced process requiring extensive planning. To ensure a smooth process, it is essential to partner up with an experienced attorney to create a plan to move forward.

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If you or a loved one would like to know more about how bankruptcy affects child support, get your free consultation with one of our child support attorneys today!