Bankruptcy can be a good means to start over financially. By declaring bankruptcy, you can release your credit card debts, medical debt, as well as several back taxes. Bankruptcy shields you from bank levies, foreclosure, wage garnishment, and repossession while you organize your financial affairs. What about child support and bankruptcy? Read on to find out how bankruptcy affects child support payments.
How Child Support Works
The law stipulates that both parents are required to provide for their children after they are born. Child support is money that one parent receives from the other to assist with the child's expenses. In general, the noncustodial parent makes child support payments to the custodial parent since the custodial parent handles the housing costs, and food, and offers everyday care to their child. When there is joint custody, child support obligations could fall on the parent who has the least contact with their child. The court decides how much money you have to pay.
The court will decide how much you must pay. It is determined by your as well as the other parent's income, the child's special needs, the financial capacity of the custodial parent, as well as any other variables that impact the custodial parent's capacity to care for their child.
It is intended that the money from these contributions go toward the child's upkeep. Direct purchases like those for clothes, food, and healthcare may fall under this category. It could also be utilized indirectly for accommodation, utilities, as well as other bills, even if other household members receive some of the benefits.
Certain categories of liabilities are barred from these bankruptcy proceedings for public policy reasons. For instance, student loan debts are not dischargeable, meaning graduates can't declare bankruptcy to settle their debts before entering the lucrative job market. Certain debts accrued while driving while inebriated are exempt from bankruptcy, thus drunk drivers cannot utilize the system to avoid penalties.
Child support is among the debts that are not dischargeable in the bankruptcy proceedings. The goal of the court system is to stop people from utilizing bankruptcy as a tool to avoid providing for their children. But that does not mean filing for bankruptcy won't relieve you of your child support commitments.
California's Child Support Laws
In California, you are required by law to make child support payments at least till the child reaches the age of 18 or becomes independent. If your child is not married and is attending high school on a full-time basis, you can be required to contribute until he or she turns 19. If you don't make your installments on time, a collection lawsuit or wage garnishment could be taken against you to catch up on missed payments and retain existing ones.
If you are sustaining other children, California provides for a wage garnishment of approximately 50 percent of your income for child support. The court could seize up to 60 percent of your paycheck if you are not providing for additional dependents. They could collect up to 65 percent of your paycheck if you don't have any other obligations and are more than three months overdue on your installments.
Child Support and Bankruptcy
Once you declare bankruptcy, you conjure up the automatic stay's safeguards. This means that while your automatic stay remains in effect, creditors cannot pursue you for money owed, seize your assets, levy your assets, garnish your earnings, foreclose on your residence, or take any other collection measures against you. The automatic stay, nevertheless, typically does not extend to bills due for child support obligations.
You are required to fulfill every one of your ongoing child support obligations during the bankruptcy proceedings if you choose to file for bankruptcy. You could be pursued for collection when you continue to default on payments after filing for Chapter 7. If you have declared under Chapter 13, then the court can enable creditors to try to recover your assets in response to overdue payments.
Let us look more closely at how various forms of bankruptcies affect child support obligations.
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Child Support and Chapter 13
While declaring bankruptcy under Chapter 13 won't release you from your duties if you're late on child support obligations, it could help you catch up. Nevertheless, please remember that you must continue to pay your child support obligations during the Chapter 13 proceedings. Continue reading to find out more on how child support obligations are handled under Chapter 13 bankruptcy proceedings.
Child Support Obligations are not Eliminated By a Chapter 13 Discharge
Due to public policy issues, Congress has determined that child support obligations are too vital to be erased in bankruptcy proceedings. For this reason, any child support payment is recognized as a priority obligation under Chapter 13 bankruptcy and cannot be discharged. In addition, you need to use your Chapter 13 payment schedule to completely settle any overdue support arrears or missed payments.
Chapter 13 Bankruptcy Enables You to Make Up for Missed Child Support Obligations
One of Chapter 13 bankruptcy's key advantages is that it enables you to arrange your obligations and return some or every one of them using a reasonable repayment schedule. The Chapter 13 schedule should contain and pay off all pre-bankruptcy support obligations.
In the majority of situations, settling child support could lower the sum you would normally have to contribute through your schedule to regular unsecured lenders (including credit card providers).
Because the majority of creditors would prefer to assist their children rather than settle credit card debts, declaring bankruptcy under Chapter 13 can assist you in catching up on missed child support whilst also wiping out much of your existing unsecured obligations.
The Automatic Stay Could Offer More Protection under Chapter 13 Bankruptcy
The automatic stay in bankruptcy doesn't prevent attempts to recover child support obligations from assets that are not a subject of your bankruptcy estates. Your income, nevertheless, is regarded as a bankruptcy estate asset when you file for Chapter 13 bankruptcy. Because of this, in contrast to Chapter 7 bankruptcy proceedings, a lender must receive court approval (by applying for release from the automatic stay) before taking legal action to garnish the post-bankruptcy wages for child support.
In general, you shouldn't have to stress over a separate operation to recover those sums from outside bankruptcy provided you are completing regular plan repayments and resolving any pre-bankruptcy support obligations under the Chapter 13 bankruptcy proceeding. However, the relationship between bankruptcy and family law is complicated and can change based on where you reside as well as the judge who will be overseeing your case. Therefore, think about speaking with an experienced lawyer in your region to learn how bankruptcy can impact child support payments.
You are Required to Settle Ongoing Child Support Obligations as They Arise
You can only correct the pre-bankruptcy support payment debts through your Chapter 13 schedule. This implies that you have to keep up with any ongoing child support obligations that arise throughout your lawsuit. The court will typically remove the automatic stay should you cease paying support throughout your Chapter 13 case, allowing the creditors to pursue your wages even though they are part of the bankruptcy estates.
To Be Eligible for a Discharge, You Have To Be Current On Your Child Support Payments.
You must prove that you're current on all domestic support payments, including child maintenance before you could get a Chapter 13 release. Therefore, you must settle any outstanding child support obligations before receiving your release if you did so throughout your action.
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Child Support and Bankruptcy Under Chapter 7
If you owe child support payments, declaring bankruptcy under Chapter 7 can not discharge your obligations to settle it. Furthermore, Chapter 7 proceedings will not prevent a court process to seek or recover child support. Continue reading to find out more about how Chapter 7 bankruptcy affects child support obligations.
Chapter 7 Bankruptcy Does Not Stay Child Support Collection Actions
The automatic stay, which takes effect once you declare bankruptcy under Chapter 7, prevents the majority of creditors from pursuing you to recover your obligations. Child support obligation, on the other hand, is exempted from this law. The automatic stay doesn't preclude or postpone an action to create or recover child support from assets that are not subject to your estate's bankruptcy.
Property obtained after the declaration date isn't regarded as bankruptcy estate properties under Chapter 7 bankruptcy. This also includes any earnings collected after you filed your lawsuit. Because the post-bankruptcy wages aren't an asset of the estate, the child support collectors are permitted to pursue them during the bankruptcy proceedings.
Chapter 7 Bankruptcy Does Not Discharge Child Support Debt
Child support obligations are given special consideration under Chapter 7 bankruptcy since they are ranked as a prioritized debt. In bankruptcy, prioritized debts are not dischargeable. This indicates that when you have any unpaid child support obligations, they will not be discharged by your bankruptcy. Therefore, declaring Chapter 7 bankruptcy won't make you exempt from having to make child support payments and catch up on any outstanding obligations.
You Must Keep Up With Your Regular Child Support Payments Even While Filing For Bankruptcy
Because child support is considered a priority debt, declaring bankruptcy under Chapter 7 has no bearing on your need to make future payments when they become due. When you lag on making your child support installments, the automatic stay typically won't stop a lawsuit from being filed to recover previous due sums. Filing for bankruptcy under chapter 7 can assist you if you are unable to make your child support obligations on time by eliminating your other liabilities and releasing extra money for this purpose.
Child Support Obligations Are Paid Before The Majority Of Other Obligations
A Chapter 7 executor could liquidate any non-exempt property you own and divide the profits among your lenders. However, not every creditor is dealt with equally in bankruptcy proceedings. The kind of debt, as well as the sum of profits available, determine if a lender will be compensated.
Critical debts, like child support, are paid off before unsecured standard obligations including credit card or medical debt. Child support requirements are paid before the majority of other prioritized debts, like current tax debts. For this reason, if you have nonexempt property, declaring bankruptcy under Chapter 7 could be able to assist a lender for child maintenance in collecting past due amounts without the need to file a separate case.
Should You Declare Bankruptcy Under Chapter 13 or Chapter 7?
Now since you are aware of the various types of bankruptcies as well as how they apply to child support payments, it is important to decide which one is appropriate for your circumstances.
Although each has its drawbacks, there will always be one that is preferable to the other in a given circumstance. If you declare bankruptcy under Chapter 13, you will have more success in repaying your back child support obligations. But, if you choose this course, be careful to strictly adhere to the repayment as well as reconstruction plan to eventually be released from bankruptcy.
You must be equipped with the appropriate knowledge if you want to understand more about child support and bankruptcy.
Even though the different categories of bankruptcy were extensively covered in this blog, nothing beats speaking with an expert on the subject. Getting in touch with knowledgeable bankruptcy attorneys in Los Angeles can help you determine whether declaring bankruptcy (as well as which form) could be your best alternative, particularly if you would like to take care of your child support duties while also considerably reducing your debts.
Frequently Asked Questions on Bankruptcy and Child Support
The following are some commonly asked questions that relate to child support and bankruptcy.
How Does Child Support Affect Bankruptcy?
On the one making the payments: When you declare bankruptcy, you still have to make child support payments. If you're falling behind on your obligations, bankruptcy or even a consumer proposal could be able to lower your debt as well as other regular payments, leaving you with more money for spousal as well as child support obligations.
On the party receiving the payments: If your ex-partner owes you child support payments and declares bankruptcy, you're still eligible to receive the payment. You can learn how to file a claim to be a "priority creditor" by speaking with the Licensed Insolvency Trustee (LIT) managing your ex-partner's bankruptcy proceedings.
Can I Defer or Reduce My Child Support Obligations?
No, you cannot. Child support payments can't be postponed or stopped even after you have declared bankruptcy. You might be able to lower your payments, though, if both you and your ex-partner reach a consensus.
What If the Other Party has no Income and Doesn't Have a Job?
Some parents attempt to avoid making child support payments by becoming unemployed/quitting their jobs or becoming underemployed on purpose by deliberately reducing their working hours. The courts disapprove of this conduct. A judge could "ascribe" earnings to a parent when the court finds out that they violated the law in this way. In other terms, the judge will evaluate the other party's earning capacity and estimate child support based on the sum of earnings he/she could receive rather than the sum of money they currently earn.
The court must determine that he or she has the capacity and chance to work to apportion earnings that the party is not currently earning. In other terms, the judge will need evidence that there are open positions for which that parent is well suited before it can ascribe income.
Can I be Jailed for Failing to Make Child Support Payments?
You cannot be sent to jail only because you owe child support arrears. Nevertheless, you can face fines and possibly time behind bars when the court considers you to be in contempt of court for neglecting to make child support payments. Furthermore, if you deliberately fail to make child support payments and are eventually convicted under California PEN 270, you could be accused of a misdemeanor offense, which might result in jail time.
What Should I Do if I'm Behind on Paying Child Support?
If you are unable to make the child support payments, your proper course of action would be to lower your other outstanding obligations. Consumer proposals are a means of paying back the debt that enables you to settle certain obligations you might have. Your unsecured obligations will be eliminated through bankruptcy for much less than through consumer proposals, and it'll be easier to settle child support as scheduled.
Contact a Bankruptcy Attorney in Los Angeles
If you're unsure of how to handle bankruptcy when child support is taken into account, the first step should be to speak with a professional. Since every person's circumstances are unique, we at the Los Angeles Bankruptcy Attorney make sure that all our clients are aware of all of their alternatives. No matter the path you choose, a Licensed Insolvency Trustee will guide you through it and help you understand what you should expect from this procedure. Call us today at 424-285-5525 to get started on the process.