Child Support Issues in Bankruptcy
If a debtor has a court order to pay child support, the bankruptcy code defines child support as a domestic support obligation and is non-dischargeable. This means after a successful case has been completed, and the discharge order has been granted, any remaining balance owed on the child support will continue after the bankruptcy. For this reason the debtor must list the child support creditor on the bankruptcy; the trustee in the case may request to review the child support order.
Child support is also considered a priority debt. In a chapter 13 case secured creditors (mortgage, cars, etc.) and priority creditors (domestic support, taxes, etc.) are typically paid before other creditors. Additionally, in order for a chapter 13 plan to be feasible all priority creditors must be paid in full. This means if you have a child support arrears you will need to pay the arrears off in 5 years. Typically, this can be an advantage to most debtors because child support can be paid out over 5 years as opposed to the original terms; however, this may also make the chapter 13 plan more difficult if there is a very large amount of arrears.
If a debtor is current on child support, the debtor will continue to make the payments directly or will have it withdrawn from the debtors pay check. If the child support pays off during the case the plan payment may need to be increased to adjust for the additional disposable income.
If a debtor receives child support income it is included in the bankruptcy. In a chapter 7 case this means the child support income would be included on the means test. In a chapter 13 case the child support income would be included as part of the debtor’s disposable income and can go towards the debtors plan payment. In both chapters an important distinction is the debtor will actually receive child support and is not just entitled to it.
If you pay or receive child support and are considering filing for bankruptcy, the attorney’s at Fears | Nachawati can answer your questions. Please Call us for a free consultation 1.866.705.7584 or send an email to email@example.com.