Filing for bankruptcy can be a great way to finally get out of debt and start your financial life over. However, there are some debts that bankruptcy does not eliminate. For instance, a bankruptcy will not remove a debtor’s student loans or owed child support payments. The good news is that a Chapter 13 Bankruptcy repayment plan may help a debtor bring their missed child support payments current.
Why are child support payments not included in a bankruptcy?
The federal government has decided that some debts are too important to be erased by bankruptcy. Congress decided that it would be too fundamentally unfair to allow a person to get out of their obligation of paying child support by filing for bankruptcy. A child support payment is court ordered and the money is spent on a child’s welfare.
Debts that cannot be wiped out by bankruptcy are often referred to as priority debts. Therefore, child support is a prime example of a priority debt that cannot be removed by filing a Chapter 7 or 13 Bankruptcy. This means that even if a person receives a discharge through bankruptcy, he or she is still responsible for making child support payments. In a Chapter 7 Bankruptcy, priority debts get paid before any other debts if there are any proceeds to distribute to creditors. In fact, child support is paid even before other priority debts.
Chapter 13 Bankruptcy can help you get caught up
If a debtor is behind on their child support payments, a Chapter 13 Bankruptcy repayment plan can help. A Chapter 13 Bankruptcy can be used to reorganize debts and to catch up on missed payments for child support with a 3 to 5 year monthly payment plan.
The bad news is child support can cause the debtor to have a very high monthly payment under. The full amount of the missed child support payments must be paid back within the 3 to 5 years. Therefore, depending on our far behind a debtor is on their child support payments, their repayment plan may be much higher than the average person’s repayment plan.
Additionally, a person must continue to make their current ongoing child support payments while catching up on all missed payments. This could result in the child support portion of the repayment plan being equal to 2 child support payments or more (depending on how many child support payments have been missed). Before a court will grant a Chapter 13 Bankruptcy discharge, the debtor must certify the he or she is current on their alimony and/or child support payments.
Once bankruptcy is filed, the court will grant the debtor an automatic stay. An automatic stay is a court order that prevents most creditors from collecting debts from the debtor. An automatic stay will also prevent a creditor from continuing to contact the debtor about the debt.
If a creditor wants to continue to receive payments from the debtor it has to petition the court to receive permission first. The automatic stay does not apply to child support payments.
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 or statute.
For more information on how to file bankruptcy while having child support payment obligations, contact the Law Office of David Goldma PLLC today at 904-685-1200