January 24, 2020

How are Child Support Arrears Treated in Chapter 13 Bankruptcy?

Chapter 13 bankruptcy and child support arrearagesChild 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. [Read more…]

How are Auxiliary Benefits Treated When Custodial Parent Files Bankruptcy?

I received the following question from a reader of this blog that raises several interesting questions about auxiliary benefits and the bankruptcy process.

Your blog is the most helpful I have found on the web so far.  God Bless You!

I have just been notified that my ex will be receiving SSDI, so in turn my son qualifies for benefits.  I was told his benefits would be backdated to June 2010 so I should receive a lump sum.  My question is since this is my son’s benefits, do I have to pay taxes on what he receives?  I was going put it in his (my sons bank account for college).  AND I was about to file BK (From the divorce) so could that be seized in the Ch 7 as assets?

Here are my thoughts, which represent general information about Social Security auxiliary benefits and the bankruptcy process:  I believe that the auxiliary benefits payable to your son represents his money, not yours.  You may be the payee for those funds, but the money is not yours.  I would talk to your bank about how to set up the bank account correctly – it should be clear that the account is owned by him with you as the trustee of the account.

As far as taxes go, you need to speak to your tax preparer.  Social Security payments can be taxable based on household income, so the answer to that question will depend on your personal financial situation. [Read more…]

Chapter 7 Trustees Notify Custodial Parents When Child Support is Owed by Debtor

bankruptcy_petitionIn my law practice I represent both Social Security disability claimants as well as Chapter 7 and Chapter 13 bankruptcy clients.  Not surprisingly, many of my Social Security disability clients end up as bankruptcy clients.  I also represent quite a few single moms in bankruptcy.

I frequently get questions from custodial parents (usually moms) who want to know if there is any way to find out if the non-custodial parent has applied for or is receiving Social Security disability.  The answer to this question is “not directly from Social Security” as privacy laws prevent Social Security employees from revealing this information.

Although SSA will not reveal any information about disability benefits to a third party, that information is a matter of public record if the Social Security recipient files for bankruptcy.  Bankruptcy petitions are publicly accessible documents and can be reviewed by anyone.

Further, under the 2005 changes to the bankruptcy laws, any Chapter 7 debtor who is currently paying child support must reveal that information to his Chapter 7 trustee.  The trustee then sends out a form letter to both the custodial parent and any child support enforcement agency.

Child support debt is not dischargeable in bankruptcy.  However, a bankruptcy petition may serve as a source of information about assets, other sources of income.   You can access bankruptcy petitions and associated paperwork in person by visiting the office of the Clerk of Bankruptcy Court where the debtor filed, or you can access this information electronically using a system called PACER.