Posted on: 14 March 2016
If you are considering filing for bankruptcy and owe past-due child support or alimony, there are several things that you should take into consideration. Child support, a non-dischargeable priority debt, can affect which type of bankruptcy you choose to file for and how you approach the proceedings. Here are some factors to take into consideration:
Under bankruptcy law, there are 19 types of debt that cannot be discharged when you file for bankruptcy. These include debts related to taxes and customs, student loans, and domestic responsibilities. Debts that are considered part of domestic responsibility include past-due child support and alimony as well as debts owed to a spouse due to a divorce settlement.
This means that if you owe past-due child support, your obligation cannot be forgiven. However, filing for bankruptcy can ease your other financial obligations, making it easier to meet your domestic obligations.
Child support is considered a priority debt in both chapter 7 and chapter 13 bankruptcy. This means that when your assets are liquidated or a payment plan is created, child support will be among the first debts to be addressed.
Proof of Claim
A proof of claim is a formal document submitted by the creditor in order for their debt to be recognized in your bankruptcy case. When child support is involved it is usually the custodial parent who must file a proof of claim. If your spouse does not file a proof of claim, you may want to file one on their behalf. This ensures that the debt is taken into account during your repayment process and you are not left with a large child support debt once your other debts have been discharged.
If no proof of claim is filed during your bankruptcy proceedings, your assets and repayment plans may be used to pay off other non-priority debts, such as credit card debt, first. Since non-priority debts can be discharged, it is in your best financial interest to make sure that a proof of claim is filed for priority debts.
Chapter 7 Specifics
Under a chapter 7 bankruptcy, your available assets are liquidated to help pay off your debts. Once that is completed, the remainder of your non-priority debts are usually discharged and you will be required to continue paying back priority debts.
When you begin chapter 7 bankruptcy proceedings, you are granted an automatic stay against most forms of debt collection. However, child support is not granted an automatic stay. This means that debt collectors can continue to try to collect past child support while you are completing chapter 7 proceedings. Furthermore, assets that you acquire after the date of filing are not included in your chapter 7 bankruptcy. This means your wages or other income are not protected from debt collectors under a chapter 7 filing.
The benefit of filing chapter 7 bankruptcy when you owe child support is that your available assets will be used to pay off your child support first.
Chapter 13 Specifics
When you file for chapter 13 bankruptcy, you will work with a mediator to create a repayment plan for your debts. Under this plan, many of your unsecured debts may be reduced. However, child support will not be reduced and must be fully repaid and current before the rest of your debt can be discharged.
When child support is involved in a chapter 13 bankruptcy, the bulk of your monthly payments will be paid towards the child support or other priority debts. While you are in repayment, the assets you acquire, such as your wages from a job, are protected and debt collectors are unable to seek higher payments from you.
For advice on your specific case, you should consult an experienced bankruptcy lawyer from an establishment like Wade Bettis, J.D., Ph.D., PC.Share