Filing for bankruptcy can discharge (wipe out) various forms of debt, or reorganize the debt into a more manageable payment plan. However, some types of debt cannot be discharged in bankruptcy. For example, in California, filing for bankruptcy will not halt child support payments. However, filing for Chapter 13 bankruptcy in Roseville may allow a parent to get their child support payments into a more practicable repayment plan. If you need assistance determining if filing bankruptcy is right for you, contact the Sacramento and Roseville bankruptcy attorneys at The Bankruptcy Group today.
Types of Bankruptcy in CA
There are many different types of bankruptcies that can be filed by individual debtors or even business entities. Some examples include:
- Chapter 7 (Liquidation, straight bankruptcy)
- Chapter 9 (Municipal bankruptcy)
- Chapter 11 (Reorganization)
- Chapter 12 (Family farmer bankruptcy, family fisherman bankruptcy)
- Chapter 13 (Reorganization, wage earner plan)
- Chapter 15 (Ancillary bankruptcy)
- Chapter 20 (Colloquial term for Chapter 7 followed by Chapter 13)
Together, Chapter 7 and Chapter 13 account for the majority of bankruptcy cases in California, followed by Chapter 11. Therefore, our Roseville Chapter 7 bankruptcy lawyers will focus primarily on Chapter 7, 11, and 13 in this article.
What Forms of Bankruptcy Can Help with Child Support Payments?
Chapter 7 bankruptcy allows an individual debtor or business entity to liquidate their assets to pay off creditors and discharge debt. A debtor who petitions for Chapter 7 bankruptcy can have over a dozen forms of debt discharged, such as credit card balances, business debts, and medical bills, among others. However, as a “priority” debt, child support is not a form of debt which can be discharged by Chapter 7 bankruptcy.
Priority debts are obligations which are unsecured by collateral but prioritized by the U.S. Bankruptcy Code when there may not be enough assets to repay all a debtor’s creditors. As a result, priority debts are non-dischargeable and will remain with a debtor even after bankruptcy.
Chapter 9 bankruptcy cannot be filed by an individual debtor because it deals with the reorganization of financially distressed municipalities. Therefore, Chapter 9 is irrelevant when discussing individual bankruptcy cases.
Chapter 11 bankruptcy deals with the reorganization of debt and is usually filed by corporations or other business entities, but may also be filed by individual debtors as well. Under Chapter 11 bankruptcy, a debtor develops a plan of reorganization which takes into consideration factors like the debtor’s assets, liabilities, current income, and expenditures to formulate an efficient plan to repay creditors.
The reorganization plan is subject to bankruptcy court and creditor approval before it can be instituted. However, like Chapter 7 bankruptcy, child support is still considered a priority debt which cannot be discharged. Child support will continue to be a debt an individual must pay after filing for Chapter 11 bankruptcy.
Chapter 12 bankruptcy is primarily to help financially troubled family farmers or family fisherman to produce a repayment plan to handle all their debts. Child support remains a priority debt under Chapter 12 bankruptcy and cannot be discharged by the bankruptcy proceedings. The only distinction Chapter 12 provides when considering child support is that a repayment plan must be for five years and include all of the debtor’s disposable income, unless it opts to pay all of a domestic support claim.
Chapter 13 bankruptcy may be ideal for individual debtors who have a regular source of income and can develop an acceptable repayment plan spanning three to five years to repay creditors. As mentioned earlier, Chapter 13 bankruptcy cannot discharge child support. However, Chapter 13 bankruptcy allows a debtor to include child support payments in their repayment plan. The payments can even be stretched over a period of five years provided that the bankruptcy court accepts the repayment plan. A Chapter 13 debtor should be aware that if they fail to make any post-filing child support payments, the bankruptcy court could dismiss or convert the Chapter 13 bankruptcy case to a Chapter 7 bankruptcy case. Though each debtor’s situation is different, Chapter 13 bankruptcy is likely to have the greatest impact on a debtor who is responsible for providing child support to a former spouse or partner.
Chapter 15 bankruptcy deals with insolvency cases that include multiple parties and multiple countries. Chapter 15 bankruptcy does not concern domestic support cases.
Our Roseville Bankruptcy Attorneys Can Help You with Debt Management
Filing for Chapter 13 bankruptcy in Sacramento, Roseville, or Folsom could be the answer for a parent who seeks to deal with their child support payments in California. However, bankruptcy is not something to consider lightly or without the advice of an experienced bankruptcy attorney. If you are worried about mounting child support payments and are curious about bankruptcy as a possible solution, contact the Roseville bankruptcy lawyers of The Bankruptcy Group today at (800) 920-5351 for a free consultation.