Bankruptcy and Child Support in New York

Dealing with bankruptcy and child support in New York can feel overwhelming. Many individuals find themselves struggling with a tough financial situation while also needing to meet their support obligation. This guide will help clarify how these two significant legal areas interact under New York law.

Bankruptcy often appears as a path to financial relief, a way to manage overwhelming debt. However, when a child support obligation is part of your financial picture, the process has specific considerations. New York has clear statutes governing how a bankruptcy case impacts child support payments and support arrears.

Understanding these rules is vital if you are considering filing bankruptcy while having a child support obligation. We will explore what you must know to handle this situation in the Empire State, ensuring your obligations remain a priority.

Understanding Bankruptcy in New York

Bankruptcy is a federal legal process designed to help people and businesses who cannot repay their outstanding debts. It offers a fresh start by liquidating assets to pay creditors or by creating a repayment plan. In New York, individuals typically file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code.

Chapter 7 bankruptcy is often called liquidation bankruptcy. In this type of bankruptcy filing, a trustee is appointed to sell any non-exempt assets, and the proceeds are distributed to creditors. Many unsecured debts, like credit card debt or personal loans, can be discharged, meaning you are no longer legally required to pay them.

Chapter 13 bankruptcy involves a reorganization of debts. If an individual files Chapter 13, they propose a repayment plan to pay back some or all of their debts over three to five years. This option is often suitable for those with regular income who want to keep secured assets, like a home or car, or need to catch up on non-dischargeable debts like outstanding child support.

The Role of a Bankruptcy Attorney

When facing such a critical financial situation, seeking legal guidance from an experienced bankruptcy attorney is highly recommended. A knowledgeable bankruptcy lawyer can analyze your specific circumstances and advise on the best course of action. They will explain the nuances of NY bankruptcy law, help prepare your bankruptcy case, and represent you in bankruptcy court.

Many attorneys offer an initial consultation to discuss your options. This meeting can help you understand the bankruptcy process, including how it will affect your child support obligations and what debt relief you can realistically expect.

Child Support Obligations in New York

Child support is a continuing financial obligation that parents have towards their children. In New York, child support is determined by state law and is considered a critical responsibility. The funds are intended to cover a child’s essential needs, such as housing, food, clothing, education, and healthcare.

New York law treats child support, and other domestic support obligations like spousal support, as priority debts. This special status means that child support obligations cannot be eliminated through bankruptcy. The duty to pay child support continues even after an individual files for bankruptcy and receives a discharge of other debts.

A divorce decree or separation agreement will typically outline the terms of child support payments. These legal documents are enforceable by the court, and failure to comply can lead to severe consequences. The support obligation outlined in these agreements must be respected throughout any bankruptcy proceedings.

How Child Support is Calculated in NY

New York employs the Child Support Standards Act (CSSA) to determine the amount of child support. The calculation starts with a percentage of the parents’ combined adjusted gross income, varying by the number of children:

• 17% for one child.
• 25% for two children.
• 29% for three children.
• 31% for four children.
• At least 35% for five or more children.

This formula provides a baseline child support obligation. However, a family law court can adjust this amount based on various factors. These factors may include the child’s special needs, educational expenses, childcare costs, and the financial resources of each parent; the court considers what is fair and in the best interest of the child.

How Bankruptcy Affects Child Support in NY

When you initiate a bankruptcy filing in New York, it is crucial to understand that this action does not erase your child support obligations. Under the Bankruptcy Code, child support is classified as a domestic support obligation, making it a priority debt. This means you cannot discharge child support in bankruptcy, whether it’s current child support or support arrears.

If you file for Chapter 7 bankruptcy, you must continue making your current child support payments. Any accumulated child support arrears will also persist after the bankruptcy case concludes; collection actions for these arrears can resume once the bankruptcy is over. These support obligations owed must be addressed.

In a Chapter 13 bankruptcy, the repayment plan you propose must fully address any child support arrears. You are required to pay these arrears in full over the life of the plan, typically three to five years. Additionally, you must stay current on all ongoing child support payments while the Chapter 13 repayment plan is active.

The Bankruptcy Estate and Support Payments

When an individual files for bankruptcy, a bankruptcy estate is created, consisting of the debtor’s property. While the automatic stay protects this estate from most creditors, domestic support obligations are handled differently. Payments for current child support and arrears may sometimes be made from the bankruptcy estate, particularly in Chapter 13 cases, as part of the confirmed repayment plan.

It is vital to include child support obligations accurately in your bankruptcy paperwork. Failure to do so can complicate your bankruptcy case and does not alter the non-dischargeable nature of these debts. A bankruptcy judge will scrutinize Chapter 13 plans to ensure domestic support obligations are properly managed.

The Automatic Stay and Child Support

Upon filing for bankruptcy, an “automatic stay” immediately takes effect. This court order stops most lawsuits, wage garnishments, and other collection actions against you and your property. However, the automatic stay has significant limitations when it comes to child support and other domestic support obligations.

The automatic stay does not halt:

• Legal actions to establish or modify a child support order.
• Proceedings to establish paternity.
• Collection actions to collect child support from property that is not part of the bankruptcy estate.
• Criminal proceedings for failure to pay child support.
• Interception of tax refunds, like an income tax refund, to satisfy child support arrears.

These exceptions exist because public policy strongly favors the ongoing financial support of children. Therefore, even during bankruptcy proceedings, efforts to collect child support can continue, particularly through wage withholding if it was in place before the bankruptcy filing. Your obligations remain, and you must continue to pay child support.

Strategies for Managing Bankruptcy and Child Support

If you are navigating the intersection of bankruptcy and child support in New York, employing effective strategies is crucial. This proactive approach can help manage your financial situation while upholding your support obligations.

1. Prioritize Your Payments

Always make your current child support payments a top financial priority. These payments are not dischargeable in bankruptcy and failing to pay child support can lead to severe consequences. These may include driver’s license suspension, passport denial, and even contempt of court charges.

2. Consider Chapter 13 Bankruptcy for Arrears

If you have substantial child support arrears, Chapter 13 bankruptcy can be a valuable tool. This type of bankruptcy allows you to include child support arrears in your repayment plan. This structured approach helps you catch up on outstanding child support over three to five years, often while protected from other collection actions.

3. Communicate with the Child Support Enforcement Agency

Maintain open communication with the New York State Child Support Enforcement Unit or your local agency. Inform them about your bankruptcy filing and provide your bankruptcy case number. They may be willing to work with you, or your bankruptcy lawyer can coordinate with them regarding your payments through a Chapter 13 plan.

4. Seek a Modification if Your Financial Situation Changes

If your income has significantly decreased or your financial situation has materially changed, you might be eligible for a modification of your child support order. This process requires petitioning the family court that issued the original order. You cannot unilaterally reduce payments due to filing bankruptcy; a court order is necessary.

5. Get Experienced Legal Help

The interaction between bankruptcy law and family law, particularly concerning child support, is intricate. It is highly advisable to seek experienced legal guidance. A bankruptcy attorney familiar with NY bankruptcy practices and domestic support obligations can provide crucial advice tailored to your circumstances, potentially coordinating with a family law specialist if needed.

The Impact of Bankruptcy on Child Support Enforcement

While a bankruptcy filing does not eliminate your child support obligation, it can influence how this debt is collected. Understanding these impacts is important for anyone managing these dual responsibilities.

Wage Garnishment

If your wages are being garnished for current child support or support arrears, this garnishment can typically continue even after you file for bankruptcy. Child support garnishments take precedence over most other types of debts and are generally not stopped by the automatic stay for ongoing payments from post-petition income. The bankruptcy court acknowledges the priority of these payments.

Property Liens

Liens placed on your property, such as real estate, for unpaid child support usually survive bankruptcy. This means if you sell the property, the child support arrears secured by the lien will need to be paid from the sale proceeds. A Chapter 13 plan might provide a way to address these liens over time, but the underlying debt for support remains.

Tax Refund Intercepts

State and federal governments can intercept your tax refund, including any income tax refund, to cover past-due child support. This ability to intercept refunds generally continues despite a bankruptcy filing. Funds intercepted for child support are applied to your outstanding child support balance.

Differentiating Property Settlements and Support Obligations

In a divorce decree or separation agreement, financial arrangements between former spouses can be categorized as either support obligations or property settlements. A property settlement agreement dictates how marital assets and debts are divided. This distinction is critical in bankruptcy because these two types of obligations are treated differently.

Domestic support obligations, which include child support and spousal support, are non-dischargeable in any chapter of bankruptcy. You must continue to pay these obligations. A bankruptcy judge will not discharge child support or spousal support debts.

Property settlement debts, however, may be dischargeable in Chapter 13 bankruptcy, though not typically in Chapter 7. If a debt is part of a property settlement (e.g., an agreement for one spouse to pay certain joint credit card debts or make an equalization payment), it might be treated as a general unsecured debt. The specific language in your divorce decree or settlement agreement is crucial in determining the nature of the obligation.

Handling Child Support Arrears

Dealing with child support arrears, or past-due payments, is a significant concern for many individuals filing bankruptcy. How these arrears are handled depends largely on the type of bankruptcy filed.

Chapter 7 Approach to Arrears

In a Chapter 7 liquidation bankruptcy, child support arrears are not discharged. While the automatic stay provides temporary relief from some collection actions during the bankruptcy case, creditors can resume efforts to collect child support arrears once the bankruptcy is closed. Any non-exempt assets liquidated by the trustee will not typically be used to pay domestic support obligation arrears ahead of secured creditors unless there are excess funds, which is rare.

Chapter 13 Approach to Arrears

Chapter 13 bankruptcy offers a more structured way to manage child support arrears. Your Chapter 13 repayment plan must provide for the full payment of all outstanding child support arrears over the plan’s duration (3 to 5 years). You must also remain current on your ongoing child support payments throughout the plan. Successfully completing a Chapter 13 plan can help you become current on support obligations owed.

Failing to address support arrears properly in your bankruptcy filing can jeopardize your case. The bankruptcy court and trustee will scrutinize your plan to ensure these priority debts are handled according to the Bankruptcy Code. It’s essential not to try and discharge child support; this is not permissible under federal law.

Can Filing Bankruptcy Help with Child Support?

It’s a common question: can filing bankruptcy offer any relief regarding child support obligations? While bankruptcy cannot discharge child support or allow you to pay less than what is ordered, it can indirectly help your overall financial situation. This, in turn, can make it easier to meet your support obligation.

By discharging or reorganizing other debts, such as credit card debt, medical bills, or personal loans, bankruptcy can free up income. This increased cash flow can then be allocated towards making current child support payments and catching up on any support arrears. Effectively, managing overwhelming debt through bankruptcy can improve your ability to pay child support.

However, it is vital not to view bankruptcy as a way to avoid or reduce your child support payments. The legal system prioritizes the financial well-being of children, and these obligations remain paramount. An experienced bankruptcy lawyer can help you understand how bankruptcy can provide broader financial relief, making all your obligations, including child support, more manageable.

Long-Term Consequences of Not Paying Child Support

The failure to pay child support, irrespective of a bankruptcy filing, carries severe and lasting consequences in New York. These penalties underscore the importance of fulfilling your support obligation.

Legal ramifications can include contempt of court charges, potentially leading to fines or even jail time. Your driver’s license, professional licenses, and recreational licenses (like hunting or fishing) can be suspended. Furthermore, you may be denied a U.S. passport or have your existing passport renewal application rejected if you have significant child support arrears.

Financially, unpaid child support negatively impacts your credit report, making it difficult to obtain loans, mortgages, or even rent an apartment. The state has powerful tools to collect child support, including wage garnishment, seizure of bank accounts, and interception of tax refunds. These collection actions can persist for many years until all payments owed, including interest, are satisfied.

What About Spousal Support?

Spousal support, also known as alimony or maintenance in New York, is another form of domestic support obligation. Similar to child support, spousal support obligations are treated as priority debts in bankruptcy. This means spousal support cannot be discharged in either Chapter 7 or Chapter 13 bankruptcy.

If you owe spousal support, you must continue to make these payments during and after your bankruptcy case. If you have spousal support arrears, a Chapter 13 repayment plan must include provisions to pay these arrears in full. Failing to maintain current spousal support payments or address arrears can lead to the dismissal of your bankruptcy case or prevent you from receiving a discharge of other debts.

The definitions and treatment of domestic support obligations under the Bankruptcy Code are specific. Both current child support and spousal support payments owed must be diligently maintained by anyone filing bankruptcy.

Resources for Help in New York

If you are struggling with the complexities of bankruptcy and child support in New York, various resources can provide assistance and legal guidance. Many individuals in the Hudson Valley and other NY regions have found these helpful.

• New York State Unified Court System: Offers comprehensive information on court processes, including family court matters related to child support and some bankruptcy basics. Their website can be a starting point for understanding New York law.
• New York State Office of Temporary and Disability Assistance (OTDA): This agency oversees Child Support Enforcement in New York. They provide services for establishing paternity, establishing and enforcing support orders, and collecting and distributing child support payments.
• Legal Aid Societies and Non-Profit Organizations: Groups like The Legal Aid Society or local bar association pro bono programs offer free or low-cost legal services to individuals who meet certain income eligibility requirements. They can often help with family law and sometimes bankruptcy issues.

If you own a small business and are considering bankruptcy while having support obligations, the situation can be even more intricate. A bankruptcy lawyer with experience in small business bankruptcies and domestic support issues can offer specialized advice.

Conclusion

Managing bankruptcy and child support in NY simultaneously presents significant challenges, but it is not an insurmountable task. The fundamental principle is that child support obligations, including any support arrears, are not dischargeable in bankruptcy and must be prioritized. Whether an individual files for Chapter 7 or Chapter 13, the responsibility to pay child support continues.

Bankruptcy can offer substantial debt relief from other unsecured debts, potentially freeing up resources to better meet your current child support and other domestic support obligations. Understanding how bankruptcy law and New York family law intersect, staying current with payments, communicating with relevant agencies, and seeking modification of support orders when genuinely necessary are key steps.

For comprehensive legal guidance through this bankruptcy process, consulting with an experienced bankruptcy attorney like The Law Office of William Waldner is essential. Request your free consultation today by filling out our online form or calling/texting at 212-244-2882.