How Do Child Support Payments Impact My Bankruptcy?

March 5th, 2010 by Reed Allmand

Unfortunately for single parents, child support payments received in the six month period prior to filing bankruptcy will be counted as income for the purposes of the means test.  If inclusion of that child support puts your income above the median income for the state of Texas, you may be forced to file Chapter 13 bankruptcy instead of Chapter 7 bankruptcy.  What this means is that instead of receiving a discharge of your debts in bankruptcy, you may need to repay them over a 3 to 5 year period.  Here’s what you should consider:

1.  Are you already receiving child support payments?  If not, you may want to file bankruptcy before those child support payments begin.  If you are already receiving child support payments, speak with your bankruptcy attorney to find out if this will place you above the median income for Texas.
2. Are you owed back child support?  If you are considering bankruptcy, you may want to delay seeking payment on child support until after your bankruptcy case is completed.  However, if you have a reasonable expectation that this back child support will be paid, you may need to report this fact in your bankruptcy proceeding.  Please speak to your bankruptcy attorney about reporting expected child support payments.
3. Back child support payments are often exempt from creditor seizure in Chapter 7 bankruptcy.  So being able to file Chapter 7 bankruptcy may offer this added benefit.
4. It is important to note that even if you do file Chapter 13 bankruptcy your child support income will not be used in the final payment calculation.

About Reed Allmand

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Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."

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