Child support doesn't come cheap, with the average parent paying $430 per month. If you're already tight on cash, the court order for child support payments will only make your financial situation infinitely worst, and you might find yourself falling deeper and deeper in debt. One of the easiest ways out of debt is filing for bankruptcy – in particular, chapter 7 bankruptcy. While filing for bankruptcy may be a viable option in most cases, the effect that filing for bankruptcy has on child support debt is probably not what you'd expect.
Child Support Debts are Priority Debts
Child support debts fall under priority debts. Priority debts are unsecured debts, meaning they are not backed up in value by an asset, and are considered so important that they are at the front of the bankruptcy repayment line. As a result, filing for chapter 7 bankruptcy will not stop any legal proceedings that are underway to collect missing and late child support payments, and your obligation to pay for these debts will not be wiped clean at all.
It's important to familiarize with what is considered as a priority debt, and what isn't, as it will have a huge effect on your bankruptcy case.
Automatic Stays and Child Support Debts
One of the main benefits of filing for chapter 7 bankruptcy is stopping wage garnishments and other types of legal actions attempting to recollect the debt with an automatic stay. Unfortunately, child support debts are exempt from the effects of automatic stays. The automatic stay brought on by filing for chapter 7 bankruptcy will not prevent or delay a lawsuit for child support debts.
In addition, property acquired after the filing date is not considered as property of the bankruptcy estate. This includes any income earned after the filing date. Most of the time, child support creditors are going to go after these assets during your bankruptcy. Because of this, you are responsible for continuing to make child support payments during the term of your bankruptcy.
Deciding Whether or Not to File for Chapter 7 Bankruptcy
When deciding whether or not to file for chapter 7 bankruptcy, you should consider the amount you owe and the type of debts you owe. If all you owe is child support debts, then filing for chapter 7 bankruptcy will do you absolutely no good because you'll still be responsible for paying back the debts once you are discharged from bankruptcy. You will, however, be left with a poor credit score for up to ten years. This will make getting a loan in the future a lot more difficult.
If, however, you are burdened by many other debts and cannot afford paying child support, filing for chapter 7 bankruptcy can help free up your obligations towards those other debts – especially since the trustee will use liquidated assets to pay off late child support debts first. At the end, you could be caught up with late child support debts, and you could have more leeway financially to make future child support payments since all of the your non-priority debts will be wiped clean.
If you are struggling to make child support payments, filing for chapter 7 bankruptcy won't do you any good; however, if you are also burdened by other debt obligations, filing for chapter 7 bankruptcy can free up your obligations to these debts so you have more financial freedom to pay child support. By filing for chapter 7 bankruptcy, you are actually helping child support creditors collect past due payments without having to initiate any legal action. Speak with an attorney or a trustee before filing to determine whether filing is really going to help your situation financially. You can also click for more info here on the topic.