When you file for bankruptcy there are certain debts that cannot be discharged for various reasons. One of these debts that cannot be discharged is arrears on child support and/or spousal support. There is a strong public policy argument in support of this since child support and spousal support are different than borrowing money from someone. This support is money that is required to be paid to provide for their living expenses. Most individuals understand that they cannot get rid of the arrears or the ongoing support obligations through a bankruptcy. What is often misunderstood is how those debts are treated in a bankruptcy.
In a chapter 7 bankruptcy, any child or spousal support arrears simply survive the bankruptcy. This means that the Division of Child Support Enforcement (DCSE) can continue to collect these arrears. A state court can also continue to use its power to punish an individual for non-payment of child support or spousal support. Your tax refunds can be taken to pay for back support and your wages can be garnished. In addition, the bankruptcy does not stop these actions, even while your case is pending before the bankruptcy court.
Since a Chapter 13 bankruptcy is a repayment plan, these debts must be addressed in the plan. Normally child support or spousal support payments are one of the debts that is paid back as part of the plan. However, if the child support is being collected by DCSE, it can be paid directly, if DCSE consents to that. Normally when a Chapter 13 is filed, DCSE will change any wage withholding to be for just the current support payments and file a claim with the bankruptcy court for the arrears.
There are two important considerations when dealing with child or spousal support payments in a Chapter 13. First, as stated above, the bankruptcy does not automatically stop all collection actions on these debts, a state court can still take actions for the arrears even though the bankruptcy provides for the payment of those arrears. Second, the bankruptcy code has a provision that if regular support payments are not being made after a Chapter 13 bankruptcy is filed, the bankruptcy case may be dismissed. It is very important that all support payments are made after the case is filed.
If you are struggling with bills due to collection actions for support arrears, we may be able to help. Contact us or call today at 757-276-6555 to schedule a consultation to see if bankruptcy can help you.