Can I Include Child Support in Bankruptcy?
Debtors who fall behind on making spousal or child support payments may be under the impression they cannot file for bankruptcy. In fact, if you meet qualifications and requirements to file, you can seek bankruptcy protection when you fall behind. Yet, keep in mind that bankruptcy may not discharge debt related to back child support or spousal support payments. Bankruptcy may help in discharging other debt to help make support payments easier for you.
While bankruptcy is a powerful tool that can help you gain control of your finances, certain debts may not qualify for discharge. Chapter 13 bankruptcy may help you get back support payments made through a repayment plan approved by the bankruptcy court. The repayment plan may help you avoid jail time since it helps debtors get caught up on support payments. While the repayment plan is enforced, the debtor may be required to continue current alimony or child support payments.
In Chapter 13 bankruptcy a trustee is assigned to receive and forward payment to the appropriate party that is entitled. If you are seeking to discharge debt, Chapter 7 bankruptcy may be an option to consider, yet this won’t eliminate back or late support payments. The filing may help you discharge eligible debt so that you can make support payments. Chapter 13 is also an option to help you maintain your home or vehicle while getting payments caught up.
Effects of Bankruptcy on Child Support Payments
Whether you’re receiving child support payments from someone who is set to file bankruptcy or you’re responsible for making child support payments, you may wonder what affect the bankruptcy process will have when it comes to receiving or making payments. The outcome of the process may vary depending on personal circumstances and the chapter that is filed.
The automatic stay goes into effect when bankruptcy is filed and prevents most creditors from collecting payment from you. However, if back child support is owed, the stay doesn’t offer protection and you can still be pursued for the outstanding amount.
While bankruptcy doesn’t help you change payment arrangements originally set for child support, it could be a good time to have your agreement reviewed and modified with an attorney. Modification of the agreement may help you get more affordable payments. Bankruptcy can help eliminate or reduce other debt obligations to make child support payments easier to make. You may even be able to get caught up on child support payments sooner
If you are the one who receives payment for child support, you may wonder if the bankruptcy process will prevent you from receiving the payments. Usually, back child support is not dischargeable in Chapter 7 and it’s considered a priority debt in a Chapter 13 case. If Chapter 13 is filed, back child support payments would be a part of the repayment plan with payments likely to be made until the outstanding balance is satisfied.
How Bankruptcy Stops a Wage Garnishment
If a creditor is garnishing your wages, you may be able to stop the garnishment and even get some of your garnished wages back by filing bankruptcy. However, certain exceptions apply.
When you file bankruptcy, an automatic stay goes into effect that prohibits and stops most collection activities by creditors. This means that wage garnishments are also stopped as long as the bankruptcy stay is in effect. If a creditor wants to resume collection efforts, it must ask the court to lift the stay. The court will lift the stay only if the creditor has a valid reason for doing so. An unsecured creditor such as a credit card company simply wishing to resume a wage garnishment is not a valid reason for the court to lift the stay.
However, the automatic stay does not apply to domestic support obligations such as child support or alimony. These are considered priority debts that are unaffected by the automatic stay and cannot be discharged by filing bankruptcy. So if your wages are being garnished to satisfy domestic support obligations, the garnishment will not stop if you file bankruptcy.
The automatic stay ends when you receive a discharge, your case is dismissed without a discharge, or when the court lifts the stay. If you receive a discharge and the underlying obligation for the wage garnishment (such as credit card debt) was included in the discharge, the creditor cannot resume the garnishment to collect the debt after bankruptcy. If your case gets dismissed without a discharge, then the creditor can continue the wage garnishment after dismissal.
If certain conditions are met, you may be able to get back some of your wages even if they were garnished before bankruptcy. You can usually get back wages garnished within the 90-day prior to your bankruptcy filing if they were over $600 in aggregate and you have enough exemptions to cover them.
If you meet these requirements, you can file a complaint in your bankruptcy and ask that the creditor return the garnished wages. If you are represented by an attorney, whether this makes financial sense will depend on how much your attorney will charge for filing the complaint and the amount of wages you are looking to recover.
When you file bankruptcy, you are required to list all your creditors so they can be notified of the bankruptcy. However, there is a chance that creditors may not be alerted in time to put a stop on garnishments after the case is filed. If you want to make sure the garnishment stops immediately, you should give notice of the bankruptcy to the payroll department of your company.