Bankruptcy and Child Support
It is understandable that individuals may face financial struggles at times, and may find themselves unable to meet the demands of their creditors. In the event of serious financial trouble, individuals may seek relief from their problems through bankruptcy. Although many different types of debts may be discharged through Chapter 13 and Chapter 7 bankruptcy procedures, some types of debt like tax liabilities, student loans, and child support payments are not eligible for discharge.
It is important for people to understand the different types of debt that may be discharged through bankruptcy and which ones may not be discharged through the legal process. When considering bankruptcy, individuals must assess the types of debts they are struggling with and choose the right plan that fits them before proceeding with the application process.
When it comes to providing support for dependents, bankruptcy laws make it clear that child support payments are debts that should still be paid in a timely fashion. Such payments are usually referred to as “debts in nature of support” and are not eligible for discharge through either Chapter 7 or Chapter 13 bankruptcy filings.
If a parent is delinquent on support payments, the back-payments are often considered to be “child support payments in arrears” and are also still considered to be viable debts even if the parent files for bankruptcy. This way, parents are not able to shirk their financial responsibilities to their children even if they are facing serious financial difficulties.
Even though many payments cannot be discharged through bankruptcy, filing for Chapter 7 or Chapter 13 may help parents by removing dischargeable debts and allowing them to use their available funds to catch up on back payments and maintain timely payments for the future. By ridding themselves of unsecured debts, the individual going through bankruptcy will hopefully have more funds to be able to support their children and provide adequate support following the conclusion of the legal proceedings.
Many Christians face the dilemma of whether or not bankruptcy is a sin. Ever since bankruptcy filing began, this debate has been going on in the church. One thing is for sure, the topic is taboo and is rarely spoken about in social circles. In the past, most Americans would only use bankruptcy as a last resort and as a way to get a fresh start. In the last hundred years the morality of America has been spiraling downward just like the water in the toilet. As our society’s values continued to decline, people began using the legal process as a way to eliminate all their bad debt and just do it over again with no regrets. Seven years later, many of these same folks are repeating the process when it becomes available to them. Nowadays, I think it’s not about whether it is right or wrong, but how will it affect this individual’s reputation in the future and their credit rating. It’s more about the appearance of doing the right thing, rather than paying people back because your moral values tell you it’s the right thing to do. Today, if a bankruptcy filing wasn’t public record, I think more people wouldn’t have a problem with filing.
Until recently, the entire topic of bankruptcy has traditionally been looked at as immoral and carried a stigma of failure. In 2007 many Americans were forced into filing bankruptcy with no other option because what happened to the economy. Now that subject has become mainstream and many people are facing financial hardship the opinions of the bankruptcy filing process changed. Many moons ago, most Americans did everything within their power to avoid filing for bankruptcy as they did not want to wear the giant scarlet B. What’s funny is how the stigma filtered into American culture. Prior to the 1970s most people purchased everything with cash, so filing bankruptcy was uncommon for most Americans it was more for use by business owners. In extreme situations, people that had to file for bankruptcy were usually because of an illness that caused large medical bills. With the credit card revolution came a large number of Americans ending up with debt problems leading to bankruptcy filing. Before the 1960s, the term credit was almost obsolete. When technology made a way for people to carry plastic cards and opened the world of charging to everyone that couldn’t afford something otherwise.
The Bible has a lot to say about bankruptcy filing and debt. In Leviticus it talks about a person’s responsibility to pay their creditors what they owe. So that doesn’t mean you can file bankruptcy if you do have the ability to pay your creditors back. Many businesses get themselves into bad contracts that use bankruptcy filing as a means of cutting the ties with the vendor or a union and be able to renegotiate the deal they originally agreed to. In Deuteronomy it talks about the legal right to cancel debt every seven years. It also says to not be hardhearted towards the poor and cancel their debts every seventh year. What this is talking about is canceling the debt of those that don’t have the ability to pay it back. This in fact was the basis for Chapter 7 bankruptcy in the past. Congress used biblical values when creating the bankruptcy code that included filing bankruptcy every seven years. Now it changes the bankruptcy code in 2005 that number has changed to eight years. The bottom line is if a person took out the debt while intending to pay and fell upon hard times there is nothing wrong filing bankruptcy. Where things get a little confusing, in today’s economy many people over extended themselves, buying things they couldn’t afford and when it comes time to pay for the items, the person cries poor and wants to the file bankruptcy. If this person is honest with themselves and uses bankruptcy to get a second chance, as long as they learn from their past mistakes, there is nothing wrong with it.
No matter how tight money gets, taking care of your children is always a top priority. If you’ve found yourself in more debt than you can handle and are responsible for child support as well, you may wonder what filing bankruptcy will mean for your situation. Will the support payments be included in the bankruptcy? Or will they be reduced? I can help you walk through all of these important questions. One thing to be aware of is that child support cannot be discharged through any type of bankruptcy.
While filing any chapter of bankruptcy will begin the automatic stay and you can then stop making payments on unsecured debts, you will still need to stay up to date on your payments (as well as secured debt payments, if you want to keep your property.) Bankruptcy of any type will not stop your child support, and it will also not affect any court proceedings to establish or modify your support. All priority debts, such as child support, must be paid in full, on time each month, and if you fail to make your payments, you could be sued. Filing a Chapter 7 could result in some of your non-exempt property being taken and sold to repay creditors, but we’ll use the many available exemptions to protect as many of your assets as possible. If the court does take some of your property, the trustee will decide which creditors receive payment and how much. Child support is usually the top priority.
One of the benefits of choosing a Chapter 13 bankruptcy is that you can include any child support arrearages into your repayment plan as a priority debt. We’ll design your plan to include your full child support payments with the missed payments spread out over the course of your 3-5 year plan. Making your child support payments may reduce the overall debt you’ll pay off in a Chapter 13. Priority debts are paid first, with any remaining disposable income going toward other lower priority or unsecured debts. In some cases, where there is little disposable income remaining, unsecured debts aren’t paid at all before they are discharged.
It’s imperative that you stay current on your Chapter 13 repayment plan; otherwise, your creditors could file for a “relief from the automatic stay.” If this is approved by the court, you would need to begin making full debt payments immediately. You’ll need to stay current on child support payments until the end of the debt period, or your bankruptcy discharge could be delayed.
Making a Plan
Of course you want to make sure your children are provided for and are willing to make whatever sacrifices necessary to make that happen. If you need to file bankruptcy, the court will look at your overall financial situation, which could result in a modification of your child support payments. You may also be able to free up enough room in your budget through the discharge of bankruptcy to make your payments easier to handle. No matter your situation, we can work together to make a plan that works for you.