Bankruptcy Court’s Authority Over Support Payments And Arrears

Bankruptcy Court's Authority Over Support Payments And Arrears

Bankruptcy Court’s Authority Over Support Payments And Arrears

When an individual files bankruptcy, most creditors are barred from taking any collection actions against the person. However, there are a couple of exceptions to that bar. One of the largest of these exceptions is for child or spousal support. In bankruptcy, child and spousal support payments are defined as domestic support obligations. The bankruptcy law states that the filing of a bankruptcy does not stop the collection of a domestic support obligation. If the support obligation has been established by a judicial or administrative order or statute, the payments may be collected from any source of the individual who has filed a bankruptcy.

In a Chapter 13 bankruptcy, the repayment plan must provide for the payment of all arrears on a domestic support obligation. This can create a situation where the individual has provided for the payment of child or spousal support arrears through a Chapter 13 plan but the state continues to collect for those arrears outside of the bankruptcy. An individual can also be subjected to sanctions, including jail, for failure to pay a support obligation even though the bankruptcy provides for the payment of the arrears.

Fortunately, the Division of Child Support Enforcement (DCSE) in Virginia will normally modify any wage withholding order to be for current support only when they have been notified that a Chapter 13 bankruptcy has been filed. This prevents a double collection of arrears. On the other hand, the individual filing for bankruptcy may desire to keep the wage deduction in place and not pay the support arrears through the bankruptcy. This is common when the arrears are extremely large and it would be a hardship for the individual to pay the full amount through the bankruptcy. DCSE must consent to the arrears being paid directly and they will normally do so.

The bankruptcy code also provides that if the arrears are being collected by DCSE, the Chapter 13 plan may provide for less than full payment of the arrears if the individual is in a five-year repayment plan. This provision can also be useful when the arrears are too large for the debtor to pay back in a five year period or the debtor has other debts that must be paid back.

With all of the different provisions for the way that child or spousal support is treated in bankruptcy, it is important that you be represented by an attorney who understands the different payment options. If you are facing financial difficulties due to the collection of child or spousal support arrears, contact me or call me today at 757-276-6555. We will set you up with a consultation to see how bankruptcy may be able to help you.

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