How Does Bankruptcy Affect Child Support?

If you are thinking about filing for bankruptcy in Oak Park, will you still be able to keep child support payments that you are receiving from your child’s noncustodial parent? On the flip side, if you are considering bankruptcy, can filing for Chapter 7 bankruptcy ever eliminate a child support obligation? If you are a custodial parent who receives child support and the child’s noncustodial parent is filing for liquidation bankruptcy, will that bankruptcy filing be able to eliminate the child support obligation that she or he owes to you?
These are important questions to ask whenever someone with a family support obligation is filing for bankruptcy. Generally speaking, consumer bankruptcy cannot allow a person who owes child support to wipe out that obligation. However, it is important to learn more about how this works.
Priority Debt in Chapter 7 Bankruptcy Proceedings
When you file for Chapter 7 bankruptcy in the Chicago area or elsewhere in the country, there are certain types of debts that cannot be discharged. U.S. bankruptcy law lists “priority debts” that have priority in bankruptcy proceedings, meaning that these debts usually will be paid before other debts by the bankruptcy trustee, and that in most cases they are not eligible for discharge. The very first item on this list is “unsecured claims for domestic support obligations.” The law defines these domestic support obligations as debts “owed to or recoverable by a spouse, former spouse, or child of the debtor, or such child’s parent, legal guardian, or responsible relative.”
In other words, domestic support obligations include child support, but they also extend to other types of support, such as spousal maintenance. To be clear, just because a person files for personal bankruptcy, this does not mean that she or he can discharge a child support debt that is owed. On top of that, when the debtor’s estate is liquidated, child support obligations, as “priorities” under the law, typically are among the first to be paid.
What About the Automatic Stay?
Although the automatic stay does prevent most creditors from trying to collect on debts that are now part of a bankruptcy proceeding, the automatic stay typically does not impact lawsuits to collect child support that is owed. In the most immediate terms, the child support obligation continues after the debtor files for bankruptcy. The debtor likely will continue to earn wages and to acquire other property after the filing date, and as such, a lawsuit to collect on owed child support still can go after that property to pay your debt.
Filing for bankruptcy, in addition, does not mean that you can stop making payments on a child support obligation. Whether you are in good standing, or whether you owe back child support, filing for Chapter 7 bankruptcy does not affect whether you are expected to continue making payments.
What Happens to Money in Your Bank Account that Came from Child Support Payments?
Now imagine a different scenario: if you are thinking about filing for Chapter 7 bankruptcy and you have money in a bank account that came from child support payments from the noncustodial parent, what will happen to these funds? Will they have to go toward repaying your debts when your estate is liquidated?
As long as the amount you have in your account is reasonably necessary for the support of your dependents, then it is exempt under Illinois law.
Contact an Oak Park Bankruptcy Lawyer
Do you have questions about filing for Chapter 7 bankruptcy? An Oak Park bankruptcy attorney can assist you. Contact the Emerson Law Firm today.
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