By filing for bankruptcy, you are getting a second chance to manage your finances. Depending on the type of bankruptcy you file for, your debt may be wiped out, or you may set up a payment plan that can get your debt under control. However, in either case, some types of debt cannot be discharged in bankruptcy. Delinquent child support will still have to be paid.
Chapter 7 Bankruptcy
With any type of bankruptcy, an automatic stay is placed on any debt collecting activity. Essentially, creditors are prevented from pursuing you in any way to collect money in payment of a debt.
The stay does not apply to some types of debt, and delinquent child support can still be pursued while you are in the midst of bankruptcy. It will not stop any lawsuits that are in motion, and you still have to make regular child support payments while working through your bankruptcy.
In Chapter 7 bankruptcy, your assets are seized and sold to repay your debts. However, there are some exemptions that can be applied to your possessions. Any assets that are exempt, you can keep safe from bankruptcy. However, any property that you used exemptions on to keep from being seized in your bankruptcy can still be pursued to repay child support.
Child support is also considered a priority debt in Chapter 7 bankruptcy. That means that it will be repaid before any other debt. For example, if you owe $2,000 in child support and $15,000 in credit card debt, and your assets pay back $3,000, your delinquent child support will be wiped out before any money goes to your credit card debt. You credit card debt will then be discharged in your bankruptcy.
This can be advantageous in some situations. If you’re buried in debt, you can file for bankruptcy and be sure that your child support will be paid before any money goes to credit card companies or other lenders. Also, all of that other debt is still discharged.
Chapter 13 Bankruptcy
Bankruptcy works slightly differently when you file for Chapter 13. With this sort of bankruptcy, much of your debt is wiped out, and you put together a payment plan to repay your debt.
As with Chapter 7, child support cannot be wiped out in Chapter 13 bankruptcy. That debt must be paid back in full. However, the payment plan will allow you to organize your debt so that it is easier to pay back. Chapter 13 usually requires a plan that stretches over 3 or 5 years, so delinquent payments can be stretched out over a longer period, resulting in lower payments.
The automatic stay does not apply to delinquent child support in Chapter 13, as with Chapter 7. However, all your property is considered the property of the court in Chapter 13 bankruptcy. To pursue delinquent child support payments, a creditor has to make a separate legal filing. As long as you keep current with your payments, it is usually easier for the creditor to allow you to finish your bankruptcy.
This is a complicated issue, however, as it involves both family law and bankruptcy law. Consulting a lawyer is a good idea whenever an issue of this sort arises.
In All Bankruptcies
No matter the type of bankruptcy you file for, you must be current on your payments for your bankruptcy to be discharged. If you were in arrears at any point during your bankruptcy proceedings, you must show proof of payment before you can complete your bankruptcy.
Bankruptcy does not allow you to discharge child support payments, and you must keep up with your payments during bankruptcy. However, bankruptcy can be a good way to reduce your debt in this area or reorganize it to make it easier to repay. In either case, bankruptcy can help you catch up on child support payments.