Ongoing child or spousal support is a very special type of debt in bankruptcy. So is support arrearage. Here’s how bankruptcy handles them.
Filing bankruptcy stops—or “stays”—the collection of most debts. (See Section 362(a) of the U.S. Bankruptcy Code about the “Automatic Stay.”) Then at the end of the bankruptcy case most debts are discharged—legally written off. (Sections 727 and 1328 of the Bankruptcy Code.) At that point the creditor is permanently forbidden to collect the debt.
However, filing bankruptcy doesn’t stop the collection of certain specific types of debts. And it only temporarily stops the collection of other types. These tend to be the types of debts that bankruptcy does not discharge.
Also, with some debts, whether collection is stopped depends on whether you file a Chapter 7 “straight bankruptcy” or instead a Chapter 13 “adjustment of debts” case.
The special debts for which collection does not stop or may stop only temporarily include:
- ongoing monthly child and spousal support
- child and spousal support arrearage
- recent income taxes
- student loans
- debts incurred through fraud
Again, these tend to be debts that do not get discharged in bankruptcy. However, bankruptcy does provide tools for resolving such special debts permanently. Today we’ll show how this works with ongoing child/spousal support and support arrearage. We’ll cover the rest in the next couple of weeks.
Ongoing Child and Spousal Support
We need to distinguish between ongoing child and spousal support and support arrearage.
Ongoing support is what the divorce court requires you to pay on a regular basis, usually monthly. It is a type of obligation treated with more respect than likely any other consumer debt in bankruptcy.
Accordingly, filing bankruptcy does not stop the collection of ongoing support. If you are paying support voluntarily you need to continue paying it. If you are paying through a payroll deduction or a garnishment, it will continue.
This is true whether you file a Chapter 7 or a Chapter 13 case. Neither affects your continued obligation to pay ongoing support. The “automatic stay” does not apply. (Section 362(b)(2).) The discharge of debts does not apply. (Sections 523(a)(5), 1328(a)(2), and 101(14A).)
Child and Spousal Arrearage
As for support arrearage, neither Chapter 7 nor 13 can discharge this kind of debt either.
However, the automatic stay can stop collection of support arrearage, but only in a Chapter 13 case. Filing a Chapter 7 case will not stop support arrearage collection actions.
This ability to stop support arrearage collection through Chapter 13 can be extremely helpful. If you are behind on support payment, especially if you are significantly behind and its collection is financially hamstringing you, filing the more complicated Chapter 13 may well be worthwhile for this reason alone.
It’s extremely important to be aware that after filing your Chapter 13 case you can lose this automatic stay protection about collection of support arrearage. To prevent renewed collection, 1) you must keep current on your ongoing support, 2) your Chapter 13 plan must show how you will pay all the support arrearage during the case, and 3) you must consistently make your Chapter 13 plan payments so that you are in fact making continued progress towards paying off the support arrearage. If you don’t do any of these, your ex-spouse or support enforcement agency can quickly get the bankruptcy court to give permission to re-start collection of the support arrearage.