Filing for bankruptcy can provide much-needed financial relief, but not all debts are treated equally. In California, child support is considered a priority debt, meaning it cannot be discharged through bankruptcy.
However, filing for bankruptcy can still help you manage other financial obligations, making it easier to stay on top of child support payments. Here’s a breakdown of how different bankruptcy types affect child support. Contact Law Offices of Terrence Fantauzzi at (909) 552-1238 for a free bankruptcy consultation.
Priority Debts and Child Support
Child support is classified as a priority debt in bankruptcy law. Priority debts are obligations that must be paid in full and cannot be wiped out through the bankruptcy process. This applies across all types of bankruptcy filings, whether Chapter 7, Chapter 11, or Chapter 13.
However, bankruptcy can provide indirect relief by addressing other debts, freeing up resources to meet your child support obligations.
Bankruptcy Types and Their Impact on Child Support
There are three common types of bankruptcy filed in California: Chapter 7, Chapter 11, and Chapter 13. Each type handles child support differently.
Chapter 7 Bankruptcy and Child Support
What It Does: Chapter 7 bankruptcy involves liquidating assets to pay off creditors and discharging eligible debts such as credit card balances and medical bills.
Child Support Impact: Child support is not dischargeable under Chapter 7. You will still owe any unpaid support, and those payments remain a top priority during the bankruptcy process.
Benefit: By eliminating other unsecured debts, Chapter 7 can free up your financial resources, making it easier to keep up with ongoing child support payments.
Chapter 11 Bankruptcy and Child Support
What It Does: Chapter 11 bankruptcy is primarily used by businesses but can also be filed by individuals. It focuses on reorganizing debt through a repayment plan based on your income, assets, and liabilities.
Child Support Impact: Like Chapter 7, child support is a priority debt under Chapter 11 and cannot be discharged.
Benefit: Chapter 11 offers flexibility in reorganizing your finances, allowing you to address non-priority debts while maintaining your child support obligations.
Chapter 13 Bankruptcy and Child Support
What It Does: Chapter 13 bankruptcy allows individuals with a steady income to create a repayment plan for their debts over three to five years.
Child Support Impact: While child support cannot be discharged in Chapter 13, it can be included in your repayment plan. This means you can stretch overdue child support payments across the repayment period, easing your immediate financial burden.
Important Consideration: If you fall behind on child support payments during a Chapter 13 repayment plan, your bankruptcy case could be dismissed or converted to Chapter 7, so this option is best for those with reliable income.
How Bankruptcy Can Help With Financial Relief
Although child support obligations cannot be eliminated, bankruptcy can still provide relief by:
- Discharging Other Debts: Eliminating unsecured debts like medical bills or credit card balances can free up income for child support.
- Stopping Collection Actions: Filing for bankruptcy puts an automatic stay in place, temporarily halting creditor actions such as wage garnishments or bank levies. However, child support collections are exempt from this stay.
- Creating a Structured Repayment Plan: Chapter 13 allows overdue child support payments to be addressed in a manageable way over time.
Is Bankruptcy the Right Option for You?
If you’re struggling to meet financial obligations, including child support, bankruptcy may still be a viable option for managing your overall debt. Choosing the right bankruptcy chapter depends on factors like your income, assets, and financial goals.
Speak With a Bankruptcy Professional
If you’re considering bankruptcy and need guidance on how it may impact your child support obligations, Law Offices of Terrence Fantauzzi is here to help. Contact us today for a free consultation to explore your options and take the first step toward regaining control of your finances.