How does bankruptcy affect child support payments?

If you file for Chapter 7 bankruptcy and receive child support, you may be worried about losing ongoing child support payments you received before you filed for Chapter 7 bankruptcy.

All child support you receive for your dependent child after you file for Chapter 7 is exempted. In most cases, you will be able to keep unspent accumulated child support. There may be limitations on the amount you can exempt. You should contact one of our experienced Phoenix bankruptcy lawyers for a free consultation. We will evaluate your case and discuss your options.

What happens to the child support I received before I petition for bankruptcy?

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 is “exempt” and cannot be taken by a bankruptcy trustee to pay off creditors. To protect the child support you receive, list it as an asset and as exempt property in your bankruptcy petition. Be prepared with evidence proving that those funds came from child support. Again, there may be limitations on how much you can exempt. Talk to our Phoenix Bankruptcy lawyers 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 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 debts have been discharged 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. It is advisable to seek counsel from our Phoenix bankruptcy attorney so that your case may be thoroughly reviewed. Call us for a free consultation.