Your financial situation may have suffered during your divorce. The amount of debt you took plus the lingering child support payments for the next few years leave you in a bit of a bind. You find yourself getting behind in everything. It is overwhelming.
You wonder if bankruptcy can help get things turned around for you. You need a blank slate or at least a much less cluttered one. What effect, if any, will bankruptcy have on your court-ordered child support payments?
Bankruptcy does not wipe out all debts
If you speak to a bankruptcy attorney, you will find that some debts do not have the eligibility for discharge. These priority debts include the following:
- Student loans
- Federal tax liens
- Child support
- Criminal fines
- Settlement payments
These types of unsecured debts take priority over all over financial obligations when negotiating the settlement of your case.
Chapter 13 bankruptcy does allow you to restructure child support
Did you fall behind in your child support payments and now feel helpless? While you now know child support cannot just go away, there is help available. Chapter 13 is the most common type of bankruptcy filed by individuals and families who have become overwhelmed with debt. In this process, debtors and creditors meet and negotiate payment arrangements that work for both parties. Upon completion of the payment plan, the bankruptcy process is complete. You may restructure your child support obligations under Chapter 13 to help you catch up.
Chapter 7 bankruptcy pays child support first
In Chapter 7 proceedings, you sell your assets to pay off your financial obligations. Since child support is a priority debt, the trustee pays it before many other debts. Therefore, if you have $15,000 in credit card debt and $12,000 in child support payments due, assets sold totaling $15,000 will pay the child support, leaving you only $3,000 to pay towards the cards. The bankruptcy discharge will wipe out the remainder of the credit card debt.
Declaring bankruptcy is never a simple prospect, and throwing something like child support in the mix may complicate it. Merely knowing the process can help take some of the pressure off of you.