Most individual debtors who file for bankruptcy use either Chapter 7 or Chapter 13. Under Chapter 7, often called “liquidation,” a court-appointed bankruptcy trustee seizes certain assets and sells them to repay your creditors. Under Chapter 13, you design a repayment plan to gradually repay your debts over three to five years. Creditors must cease their collection efforts once you file and the court must approve your repayment plan. After your repayment period is complete, you will receive a discharge of any eligible debts that remain unpaid.
Categories of Debt
Not all debts are treated the same under Chapter 13. Bankruptcy law divides your debts into three categories — priority, secured and unsecured — and treats each category differently. Priority debts, such as child support, most taxes and the costs of the bankruptcy case, have special status and you must pay these debts in full. Secured debts, including your mortgage and vehicle loans, are those secured by collateral the lender has a right to take back. Except for mortgages, these debts can be restructured over the life of the repayment plan. Unsecured debts are those that are not secured by collateral, such as credit card charges.
Child Support Arrears
Like many other debts, past due child support can be included in a Chapter 13 repayment plan. Your ex-spouse or state child support agency can make a claim against your bankruptcy estate to bring the debt to the court’s attention. As a priority debt, any arrears must be paid off entirely over the life of the plan. In contrast, unsecured debts, such as a credit card balance remaining after your repayment plan is complete, can be discharged, or erased, by the court. In fact, child support is so significant to the bankruptcy process that the court will not discharge any of your debts until you certify you are current on your support obligations and your arrears have been paid.
When you file for Chapter 13 bankruptcy, you receive an automatic stay that halts nearly all collection efforts. Most creditors cannot attempt to collect debts once this stay is in place, but the stay does not apply to certain child support collections. Your ex-spouse can still attempt to establish child support orders or collect child support from your property if that property is not part of your bankruptcy estate, and your income can still be withheld to pay child support. For example, a court can still order your tax refund seized to pay your past due support.