For the purposes of the bankruptcy means test, child support payments are treated as income. For some bankruptcy debtors, the treatment of child support payments as income will push them over the maximum income threshold required to file Chapter 7 bankruptcy . If this happens, the bankruptcy debtor will need to repay some of their debts in Chapter 13 bankruptcy . So how should a debtor maneuver if they are receiving child support payments and want to file bankruptcy? Below are a few tips:
Back Child Support Payments
If a debtor is owed back child support payments, they may want to wait until after they file bankruptcy to seek payment. Because the bankruptcy means test examines the six months of income preceding the bankruptcy filing, receiving a lump sum child support payment can skew the numbers. If back child support payments are made after the debtor’s discharge they are not part of the bankruptcy estate. However, if a debtor has already begun the process for receiving back child support before filing bankruptcy, they need to report to the bankruptcy court that there is a possibility they will receive additional payments. Failure to report possible future child support payments could serve as grounds for dismissal of the case. Be sure to disclose all information to your bankruptcy attorney.
Even if a debtor is forced to file Chapter 13 bankruptcy, child support payments cannot be used to calculate monthly payments. Also, child support payments are exempt from creditor seizure. This means that the Chapter 13 or Chapter 7 bankruptcy debtor is free to use their child support payments to support themselves and dependents.
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