Chapter 7 doesn’t stop collection of unpaid support, but may enable you to catch up. Chapter 13 does stop this collection, conditionally.
Our recent blog posts have been about situations when creditor collection actions are not stopped by a bankruptcy filing. An example is a criminal fine or restitution. A bankruptcy filing has no effect on your obligation to pay criminal debts or on the collection of those debts.
We’ve also gotten into situations when collections are stopped only temporarily, including when that’s long enough to solve your problem. An example is a recent income tax debt. A Chapter 7 bankruptcy filing stops tax collections only for a few months. But that should be long enough to start a monthly payment plan, especially one that you can now afford after getting rid of all or most of your other debts.
So today we get into one special kind of debt for which the debt collection either doesn’t stop at all, is stopped only temporarily, or is stopped permanently. If you are behind on child or spousal support, you have three options in bankruptcy.
- Filing a Chapter 7 “straight bankruptcy” does not stop collections on unpaid support at all. But it may write off enough other debts so that you can catch up on support.
- Filing a Chapter 13 “adjustment of debts” can stop collections on unpaid support. But that can easily become only temporary.
- A Chapter 13 case can stop such collections IF you act very proactively and consistently.
We explain these today.
The “Automatic Stay” on Support Collections
Unpaid child and spousal support is a very special kind of debt. It is treated as an almost sacredly among debt. Without cataloging all the differences, you can never discharge (legally write off) a support debt. (See Sections 523(a)(5) and 101(14A) of the U.S. Bankruptcy Code). It is the highest priority of the many so-called priority debts—meaning it must be paid ahead of all other debts. (See Section 507(a)(1) of the Bankruptcy Code.)
Unpaid support is special also in that you’re helped by the automatic stay only in to a limited extent. However that limited extent may nevertheless be extremely helpful.
Some Limited Help in Chapter 7
As we said above, the automatic stay does not even come into play under Chapter 7 as to unpaid support. But in the right situations Chapter 7 still helps by discharging all or most of your other debts so that you can afford to catch up on your unpaid support.
You or your attorney would negotiate terms for catching up with your ex-spouse or with the support enforcement agency. If getting rid of your other debts gives you the financial ability to catch up quickly on support, Chapter 7 could be a practical solution.
The Practical Problem
The problem is that your spouse or support enforcement may no longer accept terms that would work for you. Since Chapter 7 does nothing to stop your ex-spouse or support enforcement from continuing or starting collection efforts against you, you have no leverage and no protection.
Temporary Help in Chapter 13
Filing a Chapter 13 case DOES stop support collections at least temporarily. But your ex-spouse or the support agency can quickly file a motion asking to resume collections. The bankruptcy court would likely grant this motion unless you meet a set of requirements, and do so timely and extremely consistently. If you don’t, actions to collect on the unpaid support could resume quickly.
Permanent Help in Chapter 13
However, IF you DO strictly follow the requirement, the collection of unpaid support obligations IS stopped under Chapter 13. And this collection continues being on hold throughout the 3-to-5-year course of the Chapter 13 case as long as you continue meeting those requirements.
Here are those crucial requirements:
- Your Chapter 13 payment PLAN shows how you will pay all the upaid support debt during the plan period.
- You pay any future ONGOING monthly support payments on time. It’s especially important that you’re on time with the payments due shortly after you file the Chapter 13 case.
- You actually DO pay your monthly Chapter 13 plan payments on time throughout the case. Otherwise you’re not paying the unpaid support debt as you committed to do in your plan.
If you follow these requirements to the letter your ex-spouse/support enforcement agency would not be able to get court permission to take any collection actions against you throughout the Chapter 13 case. Then by the end of the payment plan you’d be current on the support. Your problems on this front would be fully resolved.