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.