If I file for bankruptcy, is my exempt property safe from collection for overdue child support?
The bankruptcy trustee cannot sell your exempt property to pay child support debts, but your child support creditors may be able to get your exempt property.
If you file for Chapter 7 bankruptcy, your exempt property is safe from the bankruptcy trustee even if you owe past due child support. However, property that is exempt in your bankruptcy may be at risk in child support collection activities outside of the bankruptcy court. Whether your exempt property may be subject to collection for child and domestic support obligations during bankruptcy depends on the law in your state.
Exempt Property and the Chapter 7 Bankruptcy Trustee
When you file for bankruptcy, an "estate" is created. The bankruptcy estate consists of everything you own or have an interest in. You are allowed to designate certain property as exempt and when you do, if no one objects to your claimed exemptions within the time allowed (usually 30 days after the 341 meeting), the exempt property is no longer property of the bankruptcy estate.
Once this happens, the Chapter 7 trustee has no right to sell or exercise control over your exempt property, no matter what debts you owe or whether they will be discharged in the bankruptcy. Exceptions to this rule are rare and generally involve a finding of fraudulent behavior.
What property is exempt depends on state law. To learn what property is exempt in your state, and to learn more about how exemptions work, see our Bankruptcy Exemptions topic area.
Your Property May Not Be Safe From Child Support Creditors
However, when it comes to child support collections, just because the bankruptcy trustee cannot get to your exempt property does not necessarily mean that your property is also safe from child support creditors.
Federal bankruptcy law generally defers to other federal and state laws for the collection of child support obligations. Many of these other laws give child support creditors the right to collect from assets which would be exempt from the claims of other creditors.
Child Support Creditors Can Continue Collections During Bankruptcy
Bankruptcy law prohibits most creditors from taking any collection action against you while your bankruptcy case is pending, even if your debt to them will not be discharged in the bankruptcy. This is called the automatic stay. To learn more, see the Bankruptcy’s Automatic Stay topic area.
This is not the same for child support creditors. Bankruptcy law specifically allows child support creditors to continue collection efforts both during and after the bankruptcy.
After bankruptcy. Child support creditors may continue collection after the bankruptcy because child support obligations are not discharged in bankruptcy. (To learn more, see Nondischargeable Debts in Chapter 7 Bankruptcy.)
During bankruptcy. During the bankruptcy, child support creditors are limited to collecting only against property which is not property of the estate (this generally means exempt assets) and only to the extent that they are allowed to do this under other applicable (non-bankruptcy) laws. As long as child support creditors obey this limitation, they are not required to obtain the permission of the bankruptcy court before proceeding with collections.
Property at Risk for Collection Varies by State Law
A local bankruptcy attorney should be able to tell you what property may be at risk. For example, in Florida, if you are not claiming a homestead exemption, you are allowed to claim any assets up to $4,000 in value as exempt in bankruptcy under a wildcard exemption. While the property claimed exempt under the wildcard exemption would be safe from the bankruptcy trustee, it would not be safe from a child support creditor because Florida law specifically states that this exemption does not apply to child support enforcement actions.
Not Disclosing Past Due Child Support Obligations
Leaving your past due child support obligations out of your bankruptcy schedules to avoid putting your otherwise exempt property at risk is a bad idea. Here’s why.
- It could put your entire discharge in jeopardy and you could run the risk of fines and other criminal penalties for providing false information in a bankruptcy.
- It would also mean that the child support creditor may not be paid in your bankruptcy even if there was money recovered. Child support claims are paid before all other claims (other than the expenses of administration) in your bankruptcy. Since child support is not discharged, it is to your benefit to list any past due amounts so that the creditor can file a claim and any money recovered in your case will be used to pay child support claims before it goes to pay debts that will be discharged, such as credit card claims.
Special Bankruptcy Notice to Domestic Support Creditors and State Child Support Enforcement Agencies
Under the bankruptcy law, both Chapter 7 and Chapter 13 bankruptcy trustees are required to provide special notice to domestic support creditors and state child support enforcement agencies of the bankruptcy filing, even if you are current on your child support payments. It is very likely that any past due amounts owed will come to light as a result of this notice and it is possible that the enforcement agency may become aware of exempt assets that they did not previously know about from a review of your schedules.