Last updated December 7, 2015.
Bankruptcy is a way to clean your financial slate. Through the bankruptcy process, you can discharge credit card debt, medical debt, and even some back taxes. Bankruptcy will hold creditors at bay while you get your finances in order; it protects you from wage garnishment, repossession, bank levies, and foreclosure. What about bankruptcy and child support?
Certain types of debt are excluded from the bankruptcy process for the sake of public policy. For example, student loans aren’t dischargeable so that students can’t graduate, file for bankruptcy to discharge their debts, and then start lucrative careers. Certain debts incurred while driving under the influence are excluded from bankruptcy so that drunk drivers can’t use the bankruptcy system to escape their punishment.
Child support is one of the debts excluded from the bankruptcy process. Courts want to prevent people from using the bankruptcy system as a way out of supporting their children. However, that doesn’t mean that bankruptcy can’t help you with your child support obligations.
What Is Child Support?
When you have a child, the law asserts that both parents have a responsibility to support the child. Child support is financial support paid to one parent by the other to help cover the child’s needs. Generally, the parent without custody pays child support to the parent with custody because the custodial parent bears the cost of housing, feeding, and providing day-to-day care for the child. In joint-custody situations, the parent that spends the least time with the child may be required to pay child support. The amount you have to pay is determined by the court. It depends on how much you and the other parent earn, the specific needs of the child, the custodial parent’s financial resources, and any other factors that affect the custodial parent’s ability to provide for the child.
These payments are supposed to be used for the care of the child. That may include direct purchases such as food, clothing, and medical care. It can also be used indirectly for housing, utilities, and other expenses even though other members of the household may get some of the benefit.
Child Support In California
By law, you have to pay child support in California at least until the child is 18 or is emancipated. You may have to pay until the child is 19 if she is unmarried and enrolled in high school full-time. If you fall behind on your payments, you may face a collection action and wage garnishment to make up the back payments and keep up the current ones. California allows garnishment of up to 50% of your paycheck for child support if you’re supporting other dependents. If you’re not supporting any other dependents, the court may garnish up to 60% of your check. If you’re not supporting other dependents and you’re more than 3 months behind in your payments, they can take up to 65% of your check.
Bankruptcy And Child Support
When you file for bankruptcy, you invoke the protection of the automatic stay. That means creditors can’t sue you for payment, repossess your property, levy your bank accounts, garnish your wages, foreclose on your home, or otherwise pursue you for repayment as long as the automatic stay is in place. However, the automatic stay does not generally apply to debts owed for child support.
If you decide to file a bankruptcy, you are obligated to make all of your current child support payments through the bankruptcy process. If you miss payments after you file under Chapter 7, you can be sued for collection. If you’ve filed under Chapter 13, the court may respond to missed payments by allowing creditors to attempt to collect from all of your property.
Let’s take a closer look at how different types of bankruptcy treat child support.
Child Support And Chapter 7 Bankruptcy
When you file for bankruptcy under Chapter 7, the trustee will liquidate your bankruptcy estate (which consists of all of your nonexempt property) and use the proceeds to pay your creditors. However, not all debts are created equal in the eyes of bankruptcy law. Child support (and spousal support) obligations are repaid before any other kind of debt, including back taxes. So, the proceeds from your Chapter 7 liquidation will be paid toward your child support obligation and whatever is left over will be paid toward your other unsecured debts.
At the end of the bankruptcy process, your remaining unsecured debts will be forgiven. This is called a “discharge” and will wipe out whatever credit card, medical, and other unsecured debt you have left after your nonexempt property is liquidated and used to pay. Unlike other unsecured debts, your child support obligation cannot be discharged through bankruptcy. If you file under Chapter 7 while you owe $10,000 of child support and the trustee liquidates your estate to pay $3,000 of it, you will leave bankruptcy still owing the other $7,000, plus any payments you missed during your bankruptcy.
Under Chapter 7, the automatic stay protects your property from most collection actions. However, it doesn’t apply to the wages you earn after you file. You may be sued for collection of back child support and have your wages garnished or have other property seized for repayment.
Child Support And Chapter 13 Bankruptcy
When you file for bankruptcy under Chapter 13, you work with creditors and the court to create a payment plan that will last for three to five years. If you owe child support, you’ll use the plan to catch up on your back payments as well as to pay your other creditors.
If you file under Chapter 13, the automatic stay provides you with slightly more protection from collection actions for child support. Wages earned after you file become part of your bankruptcy estate, so creditors can’t sue to collect from them even for child support obligations.
The court will require proof that you are current on your child support payments before granting your discharge. If you’ve fallen behind, you’ll have to catch up before you receive a discharge.
Child support debt cannot be discharged through Chapter 13 bankruptcy, although the rest of your remaining unsecured debts will be. Even though filing for bankruptcy cannot wipe out your child support obligation, it can make payments easier. By removing the burden of your other debts, bankruptcy can free up your cash so you can make your child support payments.
How To Reduce Child Support
If you’re struggling to meet your child support obligation, you’re not alone.
In 2012 (the latest year for which figures are available), custodial parents only received about 60% of the child support they were owed. That leaves a total of more than $12 billion in back child support for just one year of payments. According to the Office of Child Support, parents have amassed a total of more than $110 billion in child support debt, owed to almost 40 million custodial parents. In 2013, Los Angeles alone racked up $200 million in child support arrearages.
In California, the amount of child support payments varies depending on the income of the parents and the amount of time each spends with the child. The amount can be a burden if you are a low-income individual or if you have other dependents, even if you’re working. If you lose your job or are faced with catastrophic illness, child support debt can build up quickly. You can’t discharge the debt in bankruptcy, so what should you do?
The first step is to reach out to the California Department of Child Support Services. They cannot unilaterally lower your monthly payments, but they can start the process. You’ll go before a judge and explain that your circumstances have changed and you can no longer afford to make your monthly payments. The judge may lower the amount you have to pay each month.
During this process, do not stop making your payments entirely. Partial payments are better than no payments at all and they will help to show the judge that you aren’t trying to shirk your obligation.
If you can’t get your payments lowered, consider filing for bankruptcy. While it won’t discharge your child support debt, it will remove the burden of other debts so you can channel more cash toward your support obligation. If you’re struggling with child support and other debts, reach out to one of our experienced attorneys to discuss your goals and your options.
M. Erik Clark is the Managing Partner of Borowitz & Clark, LLP, a leading consumer bankruptcy law firm with offices located throughout Southern California. Mr. Clark is Board Certified in Consumer Bankruptcy by the American Board of Certification and a member of the State Bar in California, New York, and Connecticut. View his full profile here.