Child Support Debt in Chapter 7 Bankruptcy

If you have any outstanding child support debt, filing for Chapter 7 bankruptcy won't wipe out your obligation to pay it. In addition, even though Chapter 7 stops many collection lawsuits, it won't stop a legal proceeding to establish or collect child support.

How Chapter 7 Bankruptcy Affects Child Support Collections

When you file for Chapter 7 bankruptcy, the automatic stay order put in place by the bankruptcy court stops most creditors from coming after you to collect their debts. However, child support debt is an exception to this rule.

Automatic Stay Doesn't Stop Child Support Enforcement

The automatic stay doesn't prevent or delay a lawsuit to establish child support or collect it from property that isn't part of your bankruptcy estate. (11 U.S.C. § 362(b)(2).) (Learn more about the automatic stay in bankruptcy.)

Child Support Can Be Collected From Post-Bankruptcy Wages

In Chapter 7 bankruptcy, property acquired after your filing date isn't considered property of the bankruptcy estate. This includes any wages earned after filing your case. Since your post-bankruptcy earnings aren't property of the estate, child support creditors are free to collect the monthly obligation that comes due after you file for Chapter 7 bankruptcy.

Why You Can't Discharge Child Support in Bankruptcy

Because child support is a "priority debt," filing for Chapter 7 bankruptcy won't eliminate your obligation to pay child support and make up any missed payments. You'll remain responsible for paying it. Why? Priority debts are nondischargeable in bankruptcy. (11 U.S.C. § 523(a)(5).)

Also, because child support is a priority debt, if money is available to pay creditors, the Chapter 7 trustee must pay any child support arrearages before other nonpriority debts, which are considered less critical under bankruptcy law.

Must You Continue Paying Child Support During Chapter 7?

Since child support is a priority debt, filing for Chapter 7 bankruptcy doesn't affect your obligation to make your ongoing payments as they come due. You must continue to pay your child support debt. Also, as discussed above, if you fall behind on your child support payments, the automatic stay usually won't prevent a lawsuit to collect past due amounts.

How Chapter 7 Can Free Up Income for Child Support

If you can't afford to keep up with your child support payments, Chapter 7 bankruptcy will wipe out dischargeable debts, freeing up more income to put towards child support. Many parents file bankruptcy specifically to eliminate other debts so they can afford their child support obligations.

How Bankruptcy Trustees Use Your Assets to Pay Child Support Arrears

The Chapter 7 trustee gets funds by selling your property. If you have nonexempt assets that you can't protect with a bankruptcy exemption—the laws that tell you which property you can keep—the Chapter 7 trustee can sell them and distribute the proceeds among your creditors.

Whether a creditor will get paid depends on the type of its debt and the amount of available proceeds. As discussed, priority debts, such as child support, are paid before general unsecured debts, like medical bills and credit card debt. (11 U.S.C. § 507(a)(1).) In fact, child support debt gets paid even before most other priority debts, such as recent income tax debt.

As a result, if you own nonexempt assets, you'll likely lose them in Chapter 7, but the trustee will use them to reduce your child support obligation.

Example. Jake owes $3,000 in back child support and $10,000 in credit card debt, and files for Chapter 7 to wipe out his credit card debt. The trustee nets $2,000 for creditors after selling a car Jake couldn't protect with a bankruptcy exemption. Since child support debt must be satisfied before credit card debt, the trustee will pay the entire $2,000 toward his child support obligation. Jake's discharge will eliminate his $10,000 credit card debt, but he'll remain responsible for the $1,000 in child support arrears.

Tip. Consider selling nonexempt property before bankruptcy to pay your child support debt. Although it is helpful when property lost in bankruptcy is used to pay down debts you can't discharge, you could likely sell the property for more before bankruptcy and pay more toward the debt. Not only will you get a higher price for it than the trustee would at a bankruptcy "fire sale," but you wouldn't incur the additional cost of the trustee's fee.

Chapter 7 vs. Chapter 13 for Child Support Arrears

If you're behind on child support, filing for Chapter 13 bankruptcy can sometimes be a better option. It's essential to understand how each bankruptcy chapter handles arrears and whether filing for Chapter 7 or 13 would be better for you.

Tip. Some people who owe substantial child support arrears find it helpful to eliminate debt in Chapter 7 and pay child support arrears over time in a Chapter 13 filed immediately thereafter. This process is sometimes referred to as a "Chapter 20" case. The Chapter 13 case can be filed without waiting for the typical period between multiple bankruptcies to elapse, sinceit's used exclusively for plan payments, and a discharge isn't needed.

The benefit is that it avoids a wage garnishment, and the monthly payment might be less. But it isn't allowed everywhere, and although you'll incur additional legal and trustee fees, this strategy can be worth exploring with a local bankruptcy attorney.

Need More Help?

Did you know Nolo has made the law accessible for over fifty years? It's true, and we wholeheartedly encourage research and learning. However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.