Child Support During Bankruptcy

Child Support During Bankruptcy

I recently received a query about discharging a large amount of child support before a trust was received. I answered that question, but decided to go into further detail here.

Do I Have to Pay My Child Support During Bankruptcy

Child and spousal support are not dischargeable. Not in bankruptcy court, not in family court. The powers that be, both judicial and legislative, have decided that your most important debt is the one you owe to your children and/or your spouse for support. The support of your children should be on your head, not that of general taxpayers.

You may still file bankruptcy if you owe child/spousal support. In fact, it may be advisable, because by discharging other debts, you may be better able to pay your support payments. You may still keep the exempt assets (those protected under bankruptcy law) you would normally be able to keep in bankruptcy. All assets that are not exempt will go first to the child/spousal support, then to pay any other debts. Most bankruptcies do not have any unprotected (non-exempt)   assets. However, the Chapter 7 Trustee will be even more inclined to inspect everything carefully, to make sure you are not trying to exempt non-exemptible property.

Are There Any Exceptions to Paying My Child Support During Bankruptcy

If a trust is involved, it can be ordered by either the bankruptcy court or the family law court to pay the support.

The only exception to all of this lies in Probate Law, which regulates wills and trusts. If a trust is set up as a “spendthrift trust,” the beneficiary (the person to receive the money) has no say about what, if anything, they will actually receive. The Trustee of the trust has full power to decide what, if anything, will be disbursed to the beneficiary. This is usually used because the person who puts the money into the trust, does not trust the beneficiary to make good decisions about his or her money. The Trustee makes the decisions as to which bills will be paid and which will not.

For more information on this subject contact us and schedule your free consultation where we can discuss any questions you may have about child support during bankruptcy.

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