When a divorced parent who is ordered to pay child support experiences financial difficulty, they may decide to file for bankruptcy protection to discharge unsecured debt under Chapter 7 or enter into a debt repayment plan under Chapter 13.
Chapter 7 bankruptcy is for individuals who meet certain income requirements which allows debtors to discharge – wipe clean – unsecured debt such as credit cards or medical bills. With few exceptions, assets will be liquidated to pay off creditors, with any remaining debt discharged.
A Chapter 13 bankruptcy is for debtors who earn too much income to qualify for a Chapter 7, but nonetheless are having great difficulty making ends meet. Chapter 13 is a repayment plan spanning anywhere from 3 to 5 years where a debtor pays off a portion of their debt, with any remaining debt discharged at the end of the repayment plan.
A parent may wonder if bankruptcy will change their child support obligation or if child support arrears may be forgiven under bankruptcy protection. The fact is that child support is a priority debt which cannot be discharged in either a Chapter 7 or Chapter 13 bankruptcy. Furthermore, while an automatic stay keeps other creditors away, child support remains collectible under a Chapter 7 and income earned after filing a Chapter 7 is not part of the bankruptcy estate and may be used to determine child support orders or to recover child support arrears.
When you are having financial difficulty and owe child support, don’t wait. It may be possible to seek a child support modification so that you do not accumulate child support arrears based on income you no longer have. Remember that until a modification is approved, the original child support order remains in force so it is important to act quickly if your situation has substantially changed. Contact our Waukesha, Wisconsin child support lawyers at 414-210-3135 for immediate assistance with your child support modification.