• Chapter 13 and Child Support

    When filing Chapter 13 bankruptcy in Chicago, it is critical to comprehend how child support payments and any past due balances are impacted. Unlike Chapter 7, where assets are liquidated to pay off these debts, Chapter 13 requires you to bring current all payments in arrears.

    This is because of a public policy determination by Congress to make sure that a child’s wellbeing is not jeopardized due to missed child support. This decision adds these debts to a special category called Priority Debts, which are paid off before other bills and takes precedence over others in the category such as taxes.

    However, this also means that filing for Chapter 13 bankruptcy in Chicago will not relieve you of these debts or discharge your obligations. It is extremely important that your payments continue to be made during the entire Chapter 13 repayment plan.

    Curing past due balances

    A benefit of Chapter 13 bankruptcy in Chicago is that it allows you to cure past due child support. To ensure the balance is paid off, available funds to pay bills may be applied unequally between your child support balance and ongoing payments. This may result in lower payments to non-priority debts like credit cards, medical bills and general debts.

    When you file a Chapter 13 bankruptcy in Chicago, an automatic stay is issued to all creditors. This stay does not stop efforts to collect child support debt using property that is not considered to be included in your bankruptcy estate. Different from Chapter 7, Chapter 13 includes your earnings in your bankruptcy estate. Due to this, a creditor cannot circumvent the bankruptcy to collect child support debt. Instead, they must attain permission from the court (through a motion) prior to them initiating any action to collect. Most often, this filing affects your earnings after bankruptcy, so meeting these obligations while under the repayment plan is of great advantage to you. If you are making plan payments on time and curing your pre-bankruptcy child support balance while in Chapter 13 bankruptcy in Chicago, you do not need to worry about a separate action to collect money from you outside of bankruptcy.

    Remember, Chapter 13 bankruptcy in Chicago only allows you to bring current your past due child support balance through your repayment plan. This means you must continue to make your regular payments during your filing. If you fail to pay child support during your Chapter 13, the court can lift the automatic stay and allow creditors to use your assets regardless of whether or not they are included in the bankruptcy estate.

    You are required to be current on child support payments to receive a discharge on any other debts

    You cannot receive a Chapter 13 discharge on any of your debts until you certify that you are current on all domestic support obligations, including child support when you complete your Chapter 13 plan. If you miss any child support payments during your filing, you must pay them off before you can receive your discharge.

    There may be other concerns when filing a Chapter 13 bankruptcy in Chicago as it pertains to family law and its impact related to a filing. Contact me now to have your scenario reviewed and see how I can help you determine how to file for best results.

     

  • Child Support in Chicago Chapter 7 Bankruptcy

    Filing for Chapter 7 bankruptcy in Chicago can be an uncomfortable experience, especially if you have child support payments. Making these payments on time is extremely important, but if you carry a past due balance and are filing a Chicago bankruptcy, they have a greater impact.

    Typically, when Chapter 7 is filed, an automatic stay is issued that stops most collection activities from creditors. However, child support is exempt from this rule. This financial commitment does not get discharged, postponed, suspended or changed in bankruptcy even if it is Chapter 7. It must continue as the obligation states. In fact, filing may not stop any court proceedings or lawsuits that may be in progress regarding the payment default.

    Why Can’t Child Support Be Discharged in Chapter 7?

    In Chapter 7, there are several types of “priority debts” which are not dischargeable in Chicago bankruptcy. Child support payments receive special treatment because it is considered to be one of these priority debts. This means that any outstanding commitment of this type will survive the bankruptcy and will not eliminate or change your obligation to make ongoing payments or catch up on any in arears. You must continue to make the required installments on time.

    A Hidden Benefit of filing a Chapter 7 with Child Support

    If you have outstanding child support debt or cannot afford to make the required payments, Chapter 7 Chicago bankruptcy may have a silver lining. Since this court-mandated payment is prioritized over other debt, such as credit cards, those amounts may be wiped out leaving you enough cash to become current on the financial obligation to your child. Additionally, this requirement is at the top of the priority list, so it is paid even before other debts such as back taxes, making sure your children get precedence.

    Court Mandated Payments are Prioritized Debt

    If you have assets that are nonexempt, the Chapter 7 trustee appointed to your Chicago bankruptcy can liquidate them and use the proceeds to pay creditors. However, how the trustee distributes the proceeds depends on several criteria such as the amount owed and type of debt. Priority debt (child support), is paid before general unsecured debts (medical bills, credit cards, or car loans).

    As a result, filing for Chapter 7 in Chicago can assist a child support creditor in collecting past due payments without having to engage in a separate legal action. If you are considering bankruptcy and have financial obligations mandated by the court, contact me today to learn how I can work with you to find the best filing solution.