Child support obligations – both on-going and arrears – cannot be discharged in bankruptcy. However, even non-dischargeable debts like recent tax obligations, secured installments notes and (sometimes) student loans are regularly included in Chapter 13 repayment plans.
How are child support arrearage balances treated in Chapter 13? Can the child support payer force a child support recipient to accept a 5 year payout of an arrearage balance?
The answer is “it depends.” And often, the child support recipient (i.e. the custodial parent) gets to make the decision.
First, you should understand that Section 362(b)(2)(B) specifically excludes from the automatic stay any action to collect a “domestic support obligation.” I read this to mean that if the child support payer files Chapter 13 bankruptcy, the automatic stay protection associated with a Chapter 13 filing should not stop a state court judge from hearing or ruling on a contempt action for collection of child support, nor should it stop a wage or bank account garnishment against the child support payer.
I would point out, however, that some state court judges will not assume anything about bankruptcy and will insist on an order from the Bankruptcy Judge before they will proceed with a child support collection case.
Thus, one option you have as a child support recipient is to continue with your child support collection efforts since the bankruptcy stay does not impact you. However you may decide that the child support payer’s Chapter 13 offers certain advantages to you. In some situations it may be in your interest to accept payments on the arrearage through the child support payer’s Chapter 13 plan.
Why would you want to accept arrearage payments through a Chapter 13 plan? Often you will find that the child support payer’s plan offers you the best chance to get paid, while preserving your rights to collect using state court remedies if the plan fails.
Chapter 13 operates as a court supervised repayment plan. The debtor submits a budget and a proposed plan. Usually Chapter 13 payments are made through a payroll deduction, which means that there is a reliable source of funding. Often Chapter 13 is used to stop a repossession or foreclosure, so the debtor often has a compelling reason to make his plan work.
Further, most Chapter 13 trustees will object to any plan when (1) the debtor is not current with on-going child support obligations and (2) the child support recipient objects to the proposed monthly plan distribution of the arrearage.
Therefore, the child support recipient has a great deal of leverage over the child support payer if the payer seeks to cure any arrearage in a Chapter 13. If the recipient decides that Chapter 13 is a better option for collection than state court or child support collection agencies, then a reasonable Chapter 13 plan payout may be in all parties’ best interests.