How Does Bankruptcy Affect Child Support Payments?

Debtors who were awarded child custody by the family court following the dissolution of their marriage or those in any other circumstances that dictate they receive child support should know how bankruptcy filings impact child support payments.

If you file for bankruptcy under Chapter 7 of the bankruptcy code and receive child support, you may be worried about losing ongoing child support payments you received before starting the bankruptcy process and getting bankruptcy protection. Bankruptcy Chapter 7 pertains to liquidation among the different types of bankruptcy.

In bankruptcy, there are certain debts that are not dischargeable, and there are certain assets that are exempted from inclusion in the bankruptcy estate. These exemptions vary from state to state, but in Arizona, all child support you receive for your dependent child after you file for Chapter 7 is exempted. In most bankruptcy cases, filers are able to keep unspent accumulated child support. There may be limitations on the amount that can be exempted. If you’ll be engaging in bankruptcy proceedings, you should contact one of our experienced Phoenix bankruptcy lawyers for legal advice on this matter. A bankruptcy lawyer will evaluate your bankruptcy case and discuss your bankruptcy options.

What Happens to the Child Support I Received before I Petition for Bankruptcy?

According to the bankruptcy act, all your property, including cash or money in a bank account that came from child support payments before you filed for bankruptcy, becomes part of the bankruptcy estate. However, in most cases, child support money of the debtor is “exempt” and cannot be taken by a bankruptcy trustee to pay off a creditor. To protect the child support you receive, list it as an asset and as exempt property in your bankruptcy petition. Be prepared to include evidence proving that those funds came from child support in the bankruptcy information you submit. Again, bankruptcy laws may present limitations on how much you can exempt. Talk to our Phoenix Bankruptcy attorneys for more detailed information about bankruptcy exemptions.

What Happens to the Back Child Support Owed to Me?

Back child support payments or child support arrears are considered as “payments necessary for the support of the child,” and are exempt from bankruptcy. If you are owed back child support payments, you may want to wait until after you file bankruptcy to follow up on payments. Since you will be subjected to the bankruptcy means test wherein your monthly income for the last six months before you filed for bankruptcy, are checked, receiving a lump sum child support payment can distort the numbers.  All back child support payments made after your bankruptcy discharge are not part of the bankruptcy estate. But, if you have already been receiving back child support before you filed for bankruptcy, you need to report to the bankruptcy court that there is a possibility you will receive additional payments. Failure to report possible future child support payments could serve as grounds for dismissal of your case.

In Financial Distress? Call a Phoenix Bankruptcy Law Attorney Today!

If you’re experiencing financial problems with debts that you’re unable to pay and considering personal bankruptcy as the solution, it is advisable to seek counsel from our Phoenix bankruptcy attorney so that your case may be thoroughly reviewed. From guidance on how to file a bankruptcy petition to assistance in navigating your path to debt settlement and, ultimately, to debt relief, the aid that bankruptcy law attorneys provide is invaluable. Call us now for a free legal consultation.