Most parents put their child’s well-being ahead of everything else. But despite their best intentions, financial issues can interfere with the ability to provide for a child. When money issues arise, many parents wonder “does bankruptcy cover child support?”
One of the first things a parent relying on or providing child support questions when considering bankruptcy is how filing will affect their child. If their child’s other parent is filing for bankruptcy, they wonder if it will affect the child support they receive.
Here’s what you need to know.
Child Support Obligations are Not Eliminated in Bankruptcy
If your child receives child support and his or her other parent files for bankruptcy, it does not change your situation. If the paying parent has shirked his or her obligations due to financial struggles, filing for bankruptcy could even make things easier on everyone.
The most important thing to understand about child support and how it’s affected by bankruptcy is that child support is a priority debt. As beneficial as bankruptcy is when it comes to helping with debt, it does not discharge bankruptcy. Anyone responsible for child support must continue to pay it. Anyone receiving child support will continue to receive the benefit regardless of bankruptcy.
What About the Automatic Stay?
One of the main things attracting people to bankruptcy is the automatic stay.
When someone files for bankruptcy, the court orders creditors to stop all debt collection actions. Creditors can’t contact debtors or take legal action against them concerning a debt.
The automatic stay is not the same as debt discharge, which comes later in the bankruptcy process. But despite the obligation to the debt still existing, the automatic stay offers temporary relief from creditor contact.
Unfortunately, or fortunately, if you’re the recipient parent, the automatic stay does not prevent the collection of child support. Child support payments are a court-ordered obligation. Only the court that established the payments can amend them. Child support obligations remain in place regardless of bankruptcy and anything the bankruptcy court does.
It’s also important to note that the chapter bankruptcy used doesn’t matter when it comes to child support.
Chapter 13 does make it slightly more difficult for a recipient parent to collect support from a paying parent because the paying parent’s income is part of the bankruptcy estate. This means the court takes control of the filer’s income for three to five years. To collect child support owed, the parent receiving payments must file for relief from the automatic state enacted by the court.
If you’d like to know more about how the automatic stay works, check out this information from the Cornell Law School.
Child Support is a Priority Debt
Priority debts are debts that the bankruptcy court considers more important than other types of debts. You pay these debts before the lower priority debts.
Child support is a priority debt. You pay it before credit cards or bank loans and other types of debts.
It takes priority over other priority debts. Courts satisfy child support debts before other priority debts, including tax obligations.
In Chapter 7 bankruptcy, the trustee uses liquidated assets to satisfy back-owed child support obligations. Filers continue to make current payments due. This includes any unsatisfied back payments not dealt with through asset liquidation.
In Chapter 13 bankruptcy, unpaid child support payments can be added to the payment plan. You use the income earned during the repayment plan to make current payments.
Figuring out debt prioritization and knowing what to pay and when can be confusing. An attorney can help you sort through the complex law and ensure that everything is done as it should be.
For more information or to find out whether bankruptcy is right for you, contact R. Flay Cabiness, II, P.C. at (912) 417-5041 (Brunswick, GA); (912) 809-2141 (Hazlehurst, GA) or; (912) 324-3176 (Jesup, GA) to schedule a consultation.
