Filing for Chapter 7 bankruptcy in Florida can be an uneasy experience, especially if you have child support payments. Making these payments on time is very important, but if you have fallen behind and are filing a Florida bankruptcy, they come into play more significantly.
Outstanding child support debts do not get discharged in a Florida bankruptcy even if it is a Chapter 7. These payment obligations do not get postponed, suspended stopped or changed. They must continue as the obligation states. In fact, a 7 filing may not stop any court proceedings or lawsuits that may be in progress regarding the child support payments.
Normally, when a Chapter 7 Florida bankruptcy is filed, a stay is issued automatically that stops most collection activities from creditors. However, child support is excepted from this rule. The automatic stay does not interfere in a lawsuit regarding child support.
Why can’t Child Support Be Discharged in Chapter 7 Florida Bankruptcy?
In a 7 bankruptcy, there are several types of debts categorized as priority debts which are not dischargeable in Florida bankruptcy. Child support debt receives special treatment because it is considered to be one of these priority debts. This means that any outstanding debt of this type will survive the bankruptcy and will not eliminate or change your obligation to pay child support and make up any past due payments. You must continue to make your required payments on time.
A Disguised Benefit for Child Support in Florida Bankruptcy
If you have outstanding child support debt or cannot afford to pay your required payments, Chapter 7 Florida bankruptcy may have a silver lining. Since child support is a priority debt, but many other debts are not, your other debts such as credit cards may be wiped out leaving you enough cash to make your payments and catch up on past due balances. Additionally, child support is prioritized at the top of the priority debts so it is paid even before other priority debts such as back taxes making sure your children get the benefit of your payments above all else.
Child Support as a Prioritized Debt
Child support payments are paid before most other debts. If you have nonexempt assets, the Chapter 7 trustee appointed to your Florida bankruptcy case can sell them and use the proceeds to pay your creditors. However, how the trustee distributes the payments depends on several criteria such as the type of debt and the amount of available proceeds. Priority debts, like child support, get paid before general unsecured debts like credit cards, medical bills or certain loans.
Since child support debts are paid before most other priority debts like tax obligations, if you own nonexempt assets, filing for Chapter 7 Florida bankruptcy can assist a child support creditor to collect past due payments without having to engage in a separate legal action.
If you are considering a Chapter 7 Florida bankruptcy and have obligations such as child support, contact me today to learn more about the options and strategies I can use to help you find the best solution.