Filing for bankruptcy may seem like an easy way out of the uniquely harrowing financial situation with debts great enough to bring down anybody. At this junction, it will be more appropriate to discuss bankruptcy and child support together with family law as a mosaic of complexities for a person with responsibilities such as child support and alimony.
We keep the complications in mind as our team of legal experts sheds light on the bankruptcy effects on child support and alimony in this blog. It explains what can or cannot be discharged in bankruptcy. Bankruptcy law classifies obligations into different classes, with some being more preferred than others. Ultimately, it results in child support and alimony being classified as priority debts. This, in effect, is an acknowledgment before the law that these debts are not something that would be easily removed or diminished in a bankruptcy action.
In a Hurry? Dial +18-503-850-342 Now!Child Support and Alimony Under Chapter 7
Chapter 7 bankruptcy, also known as liquidation bankruptcy, allows persons to discharge unsecured debts. Such unsecured debts, however, do not include child support and alimony. In fact, when it comes to bankruptcy and child support, these obligations remain valid and undischarged along with all other debts, which may be discharged. Any liquidated assets in a Chapter 7 may also be sold to pay for outstanding child support and alimony debts above other non-priority debts.
Child Support and Alimony Under Chapter 13
For purposes of the consumer debt discharge, Chapter 13 does not include debts that are “unsecured.” In Chapter 7, the property would be liquidated and turned into cash essentially by way of a sales transaction to creditors of the debtor to pay debts that are unsecured. It is within the theoretical expanse of the bankruptcy courts to allow debts a readjustment, thus incurring obligations to be satisfied over a reasonable time frame of not less than three years and a maximum of not more than five years. In particular, when dealing with bankruptcy and child support, it’s important to note that these obligations remain a priority and cannot simply be eliminated through either Chapter 7 or Chapter 13 proceedings.
The award does not discharge child support and alimony obligations under Chapter 13. However, it does allow for the arrangements for the payment of any arrears. Of particular importance is that current child support and alimony payments are to be maintained throughout the Chapter 13 plan period; otherwise, dismissal of the bankruptcy may occur.
The Two-Year “Arc” Before and After Being Current
Automatic Stay and Family Obligations
On the contrary, law obligations for bankruptcy and child support, and alimony will continue regardless of how debtors file for bankruptcy. The automatic stay does not protect collection attempts with respect to family obligations because the automatic stay does not apply to them. Actions to set or modify support or alimony matters, as well as income withholding for repayment of debts, are not suspended by the filing of bankruptcy. This exception shows just how highly family support obligations are regarded, clearly denoting that their priority supersedes the ability of bankruptcy to suspend a debtor’s duty to maintain a member of their own family.
Discharge vs. Discharge Secured Debts
The mechanics of the dischargeability of debts differing from these two will be variable. For example, Chapter 13 bankruptcy might discharge a debt other than direct support payments that were assigned to one spouse under a divorce decree. This distinction is especially crucial for those experiencing the financial repercussions of a divorce, as it delineates what can or cannot be restructured in bankruptcy.
In a Hurry? Dial +18-503-850-342 Now!Bankruptcy Considerations with Child Support and Alimony Obligations
Those considering bankruptcy while facing child support and alimony obligations must foresee initial planning and legal guidance.
Here are steps that someone could consider taking:
- Consult with your bankruptcy attorney: An attorney qualified in this area will best inform you about how bankruptcy might greatly affect your situation with respect to your support obligations.
- Communicate with your family law attorney: Make certain your family law attorney is aware of your bankruptcy plans, as this may affect ongoing divorce proceedings or support proceedings.
- Support payment, consider immediately: Child support and alimony payments should be held with utmost priority during the entire bankruptcy process in order not to aggravate legal repercussions.
Bankruptcy offers a way out for many. However, it does not eliminate the natural responsibilities toward child support and alimony. This obligation is one of the most paramount in the eyes of the law, signifying the commitment to safeguard dependents.
We navigate our clients through the maze of bankruptcy without losing sight of child support or alimony obligations. Should you be in some debt and worrying whether a bankruptcy filing will in any way affect your support obligations, we shall gladly see you through these challenges with clarity and confidence.
Bankruptcy and Child Support Obligations: Effect of Filing
Parents have an obligation, in law, to provide for their children financially. This is so even when they are divorced. This is the reason why, following divorce, one parent is ordered by law to pay the other parent child support. Child support is, for that reason, a legal responsibility that guarantees a child’s welfare. If you are the parent ordered to pay child support and are now in a severe financial crisis because of debts, it may be that filing for bankruptcy is one approach you are considering. Filing for bankruptcy will give you a clean slate to carry on financially. However, the matter becomes complex, especially when dealing with bankruptcy and child support, where family law and bankruptcy law intersect for people with ongoing support obligations. The intersection of family law and bankruptcy law will be explained in this article concerning child support obligations.
How Does Bankruptcy Affect Child Support?
When people are faced with suffocating debts, they may consider bankruptcy as one option among many. Chapter 7 discharges all unsecured debts; however, a plan under Chapter 13 involves making repayment arrangements over a three- to five-year period. After that, any remaining debt may be discharged. Simply put, bankruptcy allows someone to reorganize or completely wipe debts clean from one’s financial slate.
Child support, in itself, has special treatment in the context of the bankruptcy process. This is a priority debt. In other words, such debts cannot be discharged in Chapter 7 and Chapter 13 bankruptcies. Thus, bankruptcy does not and cannot terminate your obligation to pay child support. Along with the ongoing payments after filing bankruptcy, payments for child support will also be paid. Moreover, child support debts come high on the priority list for repayment before even other priority debts.
Child Support Obligations and Automatic Stay in Chapter 7 and Chapter 13 Bankruptcy
It is mandatory for the payments of child support obligations to be channeled from the proceeds from the sale of non-exempt assets during the Chapter 7 bankruptcy program. Therefore, at the end of the bankruptcy application session, any outstanding child support still has to be paid by the debtor. In a Chapter 13 bankruptcy situation, however, the child support debts would have to be settled during the phase of the repayment plan agreement.
An automatic stay goes into effect immediately after the filing of bankruptcy. The stay may put a temporary hold on most, though not all, creditor collection, and once that automatic stay takes effect, no creditor can commence or continue a collection action unless the court grants permission; however, such collection activities are outside the stay with respect to child support. The stay will not affect the establishment or modification of child support or collection through income withholding.
Bottom Line!
Filing for bankruptcy and child support or alimony payments is probably one of the most challenging situations anyone can face. It should not be that way because one does not have to go through it alone. Our highly skilled bankruptcy lawyers at Bruner Wright PA are trained for such complicated intersections of family law and financial obligations. We will keep your hand in ours throughout the case whilst taking care of your interests and finding the best possible route for you.
So, contact Bruner Wright as soon as possible to schedule a confidential consultation that would bring peace to your conscience with the knowledge that your future is being taken care of by responsible professionals.
In a Hurry? Dial +18-503-850-342 Now!