Bankruptcy is a legal process that can be used by an individual or business when they are not able to meet their financial obligations. By using the legal process of bankruptcy, the debtor will liquidate their assets or restructure their finances so that they can fund or eliminate those debts they cannot pay.
There are numerous different types of bankruptcy, called chapters. All of the chapters are defined and governed under federal laws.
Consumer bankruptcy is a legal process that an individual can use when they cannot repay the debts they incurred for their personal needs. Once a consumer bankruptcy is completed, the debtor that filed for bankruptcy will no longer be responsible or liable for the debts that they incurred.
It is important to note that there are certain debts that are not dischargeable under bankruptcy laws. In addition, once the consumer bankruptcy proceedings are completed, the bankruptcy court will enter an official discharge order that releases the debtor from the debts discharged in the bankruptcy.
This signed discharge order will then provide the debtor with a clean financial slate from their dischargeable debts. It is important to note, however, that any bankruptcy filings will remain on the debtor’s credit report for up to ten years.
In addition, filing for bankruptcy may also have other long-term consequences on a debtor. Because of these issues, bankruptcy should be used as a last resort for debtors who are suffering from extreme financial hardship.
Child support is provided in order to cover the expenses of providing a child with basic living necessities, including:
Typically, luxury items are not intended to be covered by child support. In addition, child support is not designed to cover the living expenses of the custodial parent or parent with whom the child resides.
Child support payments are legally enforceable when they have been ordered by the court or if the parents of the child have a valid child support agreement in place that has been approved by a court.
When two spouses get divorced, one of the spouses may be ordered to make child support payments to the other spouse. The spouse who cannot meet their financial obligations may file for bankruptcy.
If a court approves the bankruptcy filing, their debts may be discharged or canceled, or they may be reorganized. However, child support obligations are not discharged in bankruptcies.
Child support obligations must still be paid even if an individual does file for bankruptcy. When spouses obtain a divorce, one spouse may be ordered to make child support payments to the other.
Even if a parent files for bankruptcy, their child support obligations will not be discharged and must still be paid.
As discussed above, if an individual is in debt, they may attempt to improve their financial situation by filing a bankruptcy petition. A bankruptcy petition includes a series of documents that are filed with the bankruptcy court.
The individual who is filing the petition is referred to as the petitioner. In a bankruptcy petition, the individual will list their assets and liabilities or the debts they owe to others.
If the bankruptcy court determines that the petitioner’s income is below a certain threshold, they will be discharged from some or all of their debts listed. This means that they will not be required to pay those debts.
In general, the court will examine whether the petitioner satisfies the means test. The means test was developed by the United States Congress.
It examines whether the individual’s income is low enough that they are not likely to make enough to pay off their debts. If the individual passes this test, they will be eligible for a Chapter 7 bankruptcy.
This type of bankruptcy allows an individual to eliminate as much debt as the law allows. In contrast, if an individual files a Chapter 13 bankruptcy, their debts will be reorganized rather than eliminated.
With a Chapter 13 bankruptcy, the court will provide for a repayment plan that the petitioner will be required to follow.
Under United States bankruptcy laws, child support is classified as a non-dischargeable debt. This applies in both Chapter 7 and Chapter 13 proceedings.
A non-dischargeable debt is a type of debt that the petitioner will still be responsible for paying, even after successfully filing for bankruptcy. A Chapter 7 bankruptcy will not erase past child support obligations.
These past child support obligations must still be paid in full once the Chapter 7 proceeding ends. In a Chapter 13 bankruptcy, an individual who cannot complete their repayment plan can request a hardship discharge.
Even if the court grants a hardship discharge request, past-due child support must still be paid.
When an individual files a bankruptcy petition, the bankruptcy court will issue what is referred to as an automatic stay. During this stay, in general, collection activities from creditors must stop.
The stay will remain in effect until the court decides to remove or lift it. In a Chapter 7 bankruptcy, the automatic stay remains in effect until the individual is discharged.
In a Chapter 13 bankruptcy, the automatic stay will operate over a period of time, typically 3 to 5 years. The Chapter 7 bankruptcy stay does not stay any proceedings that are occurring to determine whether or not child support is due.
A proceeding to modify a child support order will also not be stayed. Additionally, the stay does not prevent a spouse who is owed child support from collecting that support from an individual who receives money after filing for bankruptcy.
Under Chapter 13, a custodial parent may attempt to establish child support during the stay. In addition, during a Chapter 13 stay, a court may still issue a wage garnishment order.
This type of order requires employers to withhold a portion of the debtor employee’s income to pay child support.
In both Chapter 7 and Chapter 13 proceedings, the payment of child support has what is called priority of distribution. This is a special priority given to these payments.
Priority of distribution means after the expenses of the bankruptcy court, as well as secured creditors, are paid, child support payments are paid next. Child support payments are also given priority over tax payments and other obligations that are not secure.
This priority is given to government bodies, for example, child welfare agencies, in addition to spouses who are entitled to child support. If the government is owed money because it provides for the care of the child, the government will receive the same priority of distribution as the custodial parent.
There may be some advantages to certain types of bankruptcy petitions, depending on the individual’s situation. Chapter 13 will offer some advantages to a debtor related to their child support payment obligations.
Chapter 13 requires the regular payment of child support while the bankruptcy proceedings are ongoing. With Chapter 13, any past=due child support will be included in the repayment plan that the debtor is required to follow.
In a Chapter 13 repayment plan, the payments will be made on a monthly basis. This allows the individual to catch up on any past due child support payments.
Chapter 7, in contrast, does not offer the individual an opportunity to catch up. Child support that they owe is simply given priority of distribution.
If you are a parent who owes child support and you need to file for bankruptcy, it is important to consult with a child support attorney in your area. Your attorney can advise you of your child support obligations.
In addition, your child support attorney can represent you at any child support hearings. You may also want to consult with a bankruptcy attorney.
Your bankruptcy attorney can advise you regarding what filing options are available for you. They can also represent you throughout the bankruptcy process.
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