Bankruptcy can help an individual get caught up on missed child support payments (often called “arrears”). Child support is priority debt and is also generally non-dischargeable, meaning it gets paid before other types of debt if there are assets to distribute and the debt cannot be wiped out through bankruptcy. The child support must be “in the nature of support” to be non-dischargeable. The Bankruptcy Court cannot modify a family court order for support. Modifications must be sought in the state court. The bankruptcy automatic stay does not apply to actions in the family court to establish paternity or to modify child support obligations.
Child Support and Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy, not only are the child support arrears non-dischargeable, but there is no automatic stay in effect. The automatic stay is a fundamental principle of the Bankruptcy Code. Absent bankruptcy court authorization it prevents creditors from trying to collect on a pre-bankruptcy debt while their case is active. For instance, if a creditor is secured, and not being paid through the bankruptcy, the secured creditor can file a Motion for Relief from the Automatic Stay, so they can proceed with collections efforts. When it comes to child support, the automatic stay is not applicable and the person to whom child support is owed is able to garnish, levy, or attach the property of the debtor without court approval.
If the Chapter 7 case is an asset case, the child support arrears will be paid first from the Trustee’s sale of any non-exempt assets, since child support is a priority debt. The general unsecured claims (such as credit cards and medical debt) will be paid (in an asset case, if funds are available) after the child support arrears are satisfied.
Child support arrears “pass-through” a Chapter 7 bankruptcy case, and will not prevent an individual from obtaining their discharge. If a debtor in a bankruptcy proceeding has been avoiding their obligations and his or her location is unknown to either the family court or the individual receiving the support, the bankruptcy filing will help locate the debtor’s whereabouts so that the support obligations can be enforced.
Child Support and Chapter 13 Bankruptcy
In a Chapter 13 case, all child support arrears must be paid before a discharge is entered. Part of the debtor’s responsibilities at the conclusion of their Chapter 13 case is to certify that all domestic support obligations are paid and up to date. The child support agency or guardian will be listed as a creditor in a debtor’s bankruptcy petition, Schedule E, and therefore will be on notice of the status of the debtor’s support obligations and whether or not arrears are owed.
A Chapter 13 bankruptcy can help an individual catch up on child support arrears. Child support is treated much like a mortgage in a Chapter 13. The debtor can roll all of the pre-bankruptcy arrears into their Chapter 13 Plan, while making their ongoing child support payment obligations each month post-bankruptcy filing. Think of it as a monthly payment plan to get current on past due support obligations.
Regardless of the chapter of bankruptcy, an individual has a responsibility to maintain child support payments once the family court has an order in place. There doesn’t necessarily need to be a child support order in place for a debt to be non-dischargeable. Debts “in the nature of support” are not dischargeable. That phrase has been interpreted through case law to include any debts incurred in the bringing up of the child or for the child’s welfare. Likely, debts outside of child support can be deemed non-dischargeable if they are “in the nature of support.” A good example is medical care expenses incurred on behalf of the child.
Know Your Rights In Child Support Obligation
Retaining a competent bankruptcy attorney is crucial to ensure that your case is properly handled and you take advantage of all the bankruptcy process has to offer. It is important to know your rights whether you are the individual who owes a support obligation or you are the individual who is owed the support obligation. If you are unsure of your rights, please give us a call for a free consultation. We have office locations in Wayne, Hoboken, Newark, and Hackensack.