When parents divorce in Florida, state courts routinely establish child support orders and incorporate the terms into the divorce decree. If the parent receiving support later files for bankruptcy, child support may impact her bankruptcy. Child support payments are treated as income, under the U.S. Bankruptcy Code. However, the expenses the recipient parent incurs for providing the day-to-day care for her child will be deducted from this amount.
Determination of Child Support
Like in many states, spouses divorcing in Florida typically resolve marital issues prior to the court issuing their divorce decree, legally ending the marriage. Common marital issues include property and debt division, child custody and support, and alimony. Child support is typically paid by the noncustodial parent -- the parent who doesn't provide a home for the child. The court awards child support in accordance with Florida's child support guidelines, which take into account the income of both parents and needs of the child.
Child Support Not Dischargeable
Debtors can file for either Chapter 7 or Chapter 13 bankruptcy. With Chapter 7 bankruptcy, the debtor gives up his nonexempt assets, which are then liquidated to pay off as much of his debt as possible. Afterward, his debt obligations are extinguished, even if his assets were not enough to pay back all of his creditors. With Chapter 13 bankruptcy, the debtor doesn't give up any assets, but agrees to enter into a payment plan that lasts three to five years. Like with Chapter 7, once the plan is completed, the debtor's obligations are wiped out, even if the plan did not pay off all of his debts. Although child support is considered a debt, it cannot be discharged in bankruptcy. If the noncustodial parent files for bankruptcy, his child support obligation remains intact. He cannot discharge any past-due support and must continue making payments. If the custodial parent files, she remains entitled to the child support payments awarded to her in the divorce.
Child Support Treated as Income
Child support payments the custodial parent receives are treated as income in a bankruptcy. In the case of a Chapter 7 filing, child support income may disqualify the custodial parent from eligibility if it places her income above the maximum amount allowed. As a result, the custodial parent may have to file for Chapter 13, which means she'll have to repay a portion of her debts. However, the child support payments won't be used in the calculation of her monthly payments. They also can't be seized by creditors, which means she is free to use the money to take care of herself and her dependents.
Child-Related Expenses May Help
The custodial parent might still qualify for Chapter 7 bankruptcy, although child support payments are treated as income. This is because any child-rearing expenses she regularly incurs as a result of being her child's custodial parent are itemized and deducted from her income. This can include mortgage or rent payments, clothing, food and childcare. These expenses may help offset the additional income created by the child support payments, keeping her within the eligibility threshold for Chapter 7.