The Surprising Benefits: Stop Collection of Support Arrearage

Ongoing child or spousal support is a very special type of debt in bankruptcy. So is support arrearage. Here’s how bankruptcy handles them. 


Most Debts

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.

Special Debts

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.


Crucial Facts about Child and Spousal Support in Bankruptcy

Filing bankruptcy mostly does not affect the collection of child or spousal support against you—except it can help in one very important way.  

Support Obligations Mostly NOT Affected by Bankruptcy

1. No discharge (“write-off”) of child and spousal support obligations

Your support obligation was determined by state law and a divorce court’s order. Bankruptcy law does not attempt to disturb that obligation. Support is excluded from bankruptcy’s legal write-off of most debts.

2. Collection of ongoing monthly support obligations not stopped

Your bankruptcy filing has no effect on your ongoing support amount(s). Again, that amount was determined by a divorce judge and can only be changed by such a judge. The monthly collection of that court-ordered amount can continue regardless of your bankruptcy filing. This is true whether you file a Chapter 7 “straight bankruptcy” or a Chapter 13 “adjustment of debts.”

3. Collection past-due support obligations also not stopped under Chapter 7

Any and all of the following can continue after you file a Chapter 7 case:

  • the voluntary withholding of support from your paycheck or account
  • the garnishment of your paycheck and/or bank account
  • the interception of your income tax refund
  • the reporting to a credit reporting agency that you’re late on support payments
  • potentially the suspension of your driver’s license and even occupational licenses

This is in contrast to how past-due support obligations are affected under Chapter 13—see below.

4. Various divorce/family court proceeding are not stopped by bankruptcy

Your bankruptcy filing stops most lawsuits and other court proceedings against you. But it does not stop divorce/family court proceedings to:

  • establish a support obligation
  • increase or decrease the support amount
  • address child custody or visitation issues
  • deal with domestic violence
  • establish the paternity of a child
  • dissolve a marriage, other than as it pertains to the division of property

Chapter 13 CAN Stop Collection of Past-Due Support

The most important way that bankruptcy can help is only available under Chapter 13. This help is for any support payments that you had not made on time and continue to owe.

Filing a Chapter 13 case stops all the potentially very aggressive ways that your ex-spouse and/or the support enforcement agency can collect any such past-due support. They have to accept catch-up payments determined by your actual ability to pay.

You have to pay the entire past-due amount by the time you finish your 3-to-5-year Chapter 13 case. And you must immediately start or continue to make any ongoing support payments strictly on time. Then when you successfully complete your Chapter 13 case you will be completely current on the support.

Bankruptcy Can Also Help Less Directly.

Both Chapter 7 and 13 can help by simply getting rid of or significantly lower your other debt obligations. Then usually you’ll be able to more reasonably pay your child and/or spousal support and avoid falling behind.

Consider Trying to Lower Your Ongoing Support Amount

As you file bankruptcy seriously consider going back to the divorce court to change the monthly support amount. If you’re filing bankruptcy now that may be a good indication that your finances have deteriorated since the domestic relations court determined the amount. Compare your income and expenses now to what they were when the support amount was determined. You may be able to lower your support obligation to a more reasonable amount.


Can Bankruptcy Help If Support Enforcement Has Garnished Your Paycheck and Is Threatening to Do Worse

If you’re behind on child or spousal support payments, Chapter 7 may help a little. Chapter 13 can help a lot.


The Power of Ex-Spouses and Support Enforcement Agencies

In most states an ex-spouse, or the local support enforcement agency acting on his or her behalf, has extraordinarily aggressive ways to collect on current and back support obligations.  These include not just ways of directly getting your money but also ways of coercing you to pay up.

So on one hand they can garnish your wages and bank accounts, take your income tax refunds, or place liens on your real estate. On the other hand they can take coercive action. For example, they can take steps to suspend your driver’s license. This includes a commercial driver’s license, so that you can’t work if you rely on that for your work. Your professional or occupational license can often also be suspended, preventing you from legally working in your profession or business as a nurse, doctor, realtor, insurance agent, mortgage broker, or even in some places athletic trainer or funeral director! Your hunting, fishing, boating and other recreational licenses could also be revoked. You might even be denied a U.S. passport.

Chapter 7 “Straight Bankruptcy” Only Provides Modest Help

Filing a Chapter 7 case unfortunately does not directly stop any of these collection methods. The “automatic stay” that stops just about all other collection efforts has an exception for child and spousal support. (See Section 362(b)(2)(B) of the Bankruptcy Code.) The only way that Chapter 7 can help is that it can often legally write off (“discharge”) all or most of your other debts so that you would be able to pay your support obligations. But that does not do much for you if you right now find yourself in support enforcement’s collections crosshairs. 

Chapter 13 Can Give Huge Help

However, your filing of a Chapter 13 “adjustment of debts” type of bankruptcy can stop all these aggressive ways of collecting past-due support obligations. Collection of the ongoing support can continue, though, even under Chapter 13.

The ability to stop collection of past-due support is hugely important, especially considering hour much these collection techniques can strangle you. But to keep up that protection you have to strictly meet a number of conditions:

  • Your Chapter 13 payment plan must show how you are going to catch up on all the past-due support during the 3-to-5-year life of the plan.
  • Then you must make your monthly plan payments on time to show that your payment plan is in fact feasible and that the past-due support is actually going to be paid in full.
  • Your budget must show that you will be able to start (or continue) making the regular monthly court-ordered support payments.
  • Then you must actually pay these regular monthly payments on time. And that starts with the first one that is legally due after your Chapter 13 is filed, and then every month thereafter.
  • At the end of your Chapter 13 case you must certify that you are current on your ongoing support payments, otherwise you cannot complete your case and get a discharge (write-off) of your remaining debts.

Looking on the positive side, Chapter 13 neutralizes some of the very dangerous power of your ex-spouse or the support enforcement agency, and then gives you the opportunity to resolve the problem. Filing a Chapter 13 case can be a great tool for catching up on your past-due support because you are allowed to favor that debt over just about every other one. You could end up paying very little if anything else towards your other debts, except those other ones that also really matter to you, like your mortgage, vehicle loan, income taxes and such.