One of the most significant contributors to a failing relationship is a financial hardship. Most people always want to know what would happen to their alimony and child support payment if they were to file for bankruptcy. While it may seem like an escape, in theory, the reality is that nothing will change.
Yes, the act of filing for bankruptcy will protect you from unsecured creditors like personal loan providers and credit card companies. But what it won’t protect you from is court-mandated payments or payments required under a divorce or separation agreement.
If you’re in a similar situation, then here are some things worth knowing about bankruptcy and alimony or child support payments.
Child Support and Alimony in Bankruptcy
The legal responsibility to take care of the child both physically, emotionally, and financially falls on both parents. This obligation is one the court takes very seriously and will rarely relieve a parent of this responsibility.
If you’re thinking of filing for bankruptcy while still paying child support, there are some things you may need to know. For example, you’ll need to understand how the bankruptcy ruling will affect your child support payment. If you’re the receiving parent, you may also be wondering how the bankruptcy filing will affect your payment. You can learn more about that in the next section.
Section 523(a) (5) of the Bankruptcy code clearly states that child support payment and alimony debt are non-dischargeable. Therefore, if the supporting parent wants to contest that, it’ll be a challenging task.
The paying spouse or parent will need to list the supported parent as a creditor. Trying to discharge alimony during bankruptcy although difficult is still possible. However, for that to happen, the supported spouse and the alimony will need to be listed on the bankruptcy petition. If they are not, then discharging the alimony is almost impossible.
Protecting the Child Support and Alimony You Receive
If you’re the receiving parent, that is, you are the one collecting the alimony or child support, then you’ll be happy to know that the court will deem you a preferred creditor.
This means that for any arrears owed before the supporting spouse filed for bankruptcy, proceeds from contributions and liquidated assets going to the bankruptcy will be distributed to you first before the other creditors get paid.
Automatic Stay Protection
The automatic stay protects you from creditors when you file for bankruptcy. It prohibits creditors from coming to collect on your debt. Before a creditor can continue a collection action while you filed for bankruptcy, they must first get permission from the court.
However, there are certain activities, such as those relating to child support that automatic stay does not apply to. These are:
- Legal proceedings to either modify or establish a child support order
- Collection of child support from property that isn’t part of the bankruptcy estate. Note that any salary earned after filing a Chapter 7 bankruptcy is not part of the bankruptcy estate. This means the automatic stay won’t protect them.
Chapter 13 Bankruptcy for Child Support & Alimony
Some debts cannot be discharged for a variety of reasons even after you’ve filed for bankruptcy. One such debt is spousal support and child support areas. Because Chapter 13 is a repayment plan, you’ll need to address those debts on the plan.