Bankruptcy won’t erase back child support—it’s one of those debts that stays with you until you pay it off. Even so, if you qualify for Chapter 7, filing for bankruptcy can help.
You’ll be able to discharge (wipe out) other debts that might be making it hard for you to pay your child support arrears, such as credit card balances, medical bills, and personal loans. Hopefully, the cash infusion that will come after wiping out those obligations might be just what you need while you catch up on your arrears.
There’s another benefit to filing for Chapter 7 bankruptcy. Since you’ve already maxed out your credit, it makes sense to file for bankruptcy earlier rather than later. By doing so, your credit score will likely be in good shape once you’ve caught up on the debt.
Even though Chapter 7 doesn’t have a mechanism to get you caught up on back child support payments, filing can assist you in other ways. Here are some benefits of filing for Chapter 7 bankruptcy.
Balances on credit cards are a common type of debt discharged in Chapter 7 bankruptcy. But you’ll need to make sure that yours isn’t a secured card that requires you to return the property that you purchased. Most credit cards are unsecured and you can wipe out the balance without returning any items. By contrast, jewelry, computers, appliances, furniture, and mattresses purchased on credit often fall into the secured category.
You’ll also be able to wipe out other obligations, such as utility bills and amounts owed on lease and rental contracts. You can discharge any debt that isn’t classified as a nondischargeable debt in bankruptcy. Typical nondischargeable debts include child support and other support obligations, recent taxes, and student loans.
When you file for bankruptcy, an injunction, called the automatic stay, goes into effect prohibiting most other creditors from continuing to try to collect debts from you. For instance, the stay will stop most collection lawsuits, but not criminal actions.
You’ll still need to make current support payments and you’ll continue to owe back support. For instance, in though you file for Chapter 7 bankruptcy, child support creditors can continue:
However, most other creditor actions will stop.
One of the hallmarks of Chapter 7 is that you can keep exempt property—necessary items you’ll need to work and live—and most filers can keep everything they own. But that’s not always the case. The bankruptcy trustee assigned to your case will sell luxury items and distribute the funds to your creditors.
There is some good news though. If the Chapter 7 trustee sells property you can't protect, the sale proceeds will likely be used to pay down your child support arrears. Why? Because child support ranks high when it comes to bankruptcy payment priority. Support arrears must be paid in full before any money gets used to pay toward dischargeable debts like credit card balances.
This is a benefit to you because any property the trustee sells will help repay your child support debt (which you'll owe after bankruptcy) and not debts that will be discharged, such as your credit card balances.
Here are a couple additional things you'll want to know.
While bankruptcy stops most wage garnishments, Chapter 7 won’t stop wage deductions or garnishments for child support. Here’s why.
Because each situation is different, you’ll likely benefit from talking to a bankruptcy lawyer about the effect a Chapter 7 case will have on your garnishment. Also, an attorney should be able to tell you whether any of your assets are at risk.
If you’re hoping to avoid your child support creditors by not listing the debt in your bankruptcy case, don’t do it. You’re required to disclose all liabilities fully when filling out your bankruptcy paperwork.
Also, the trustee will ask you questions under oath at the Chapter 7 meeting of creditors—the one hearing all filers must attend—and the trustee must notify the state child support agency of your bankruptcy filing. So one of the questions the trustee will ask is whether you owe a support obligation.
If you can’t pay your credit card balances, you could face a debt spiral that’s hard to stop. Not only do late payments hurt your credit score, but it’s also not easy to catch up once late payment fees start piling on.
Filing for Chapter 7 bankruptcy is a straightforward path to a better credit score. You’ll quickly wipe out debt and start rebuilding credit. You might be pleasantly surprised to learn how quickly you’ll be able to reestablish credit and even purchase a home. The average wait time is about three years.
Already have a home? Find out what readers say about keeping a house and car in bankruptcy.
If your employer is deducting more money than you can tolerate, you might be able to decrease the payment by filing for Chapter 13 bankruptcy. Doing so will let you stretch out payment of the arrears over up to five years.
This approach can help you avoid a wage garnishment; however, you might pay more in fees. A bankruptcy lawyer will be in the best position to help you evaluate this option.
If you’d like to learn more, read Bankruptcy Can Help You Pay Child Support Debt.
