Falling behind on child support payments is a bad situation for everyone. Not only are their serious legal issues involved, there are often 
very strong emotions in play. In Georgia and probably all other states, the failure to pay child support can land the non-paying parent in jail (usually after clear warnings from a judge). If you are behind on child support payments ordered by the family court can you file for Bankruptcy to avoid a contempt charge and jail? The answer is…maybe. It really depends on many factors, including the status of the case in family court, the demeanor of the family court judge, the extent of the past-due payments, whether or not the family court judge believes the non-paying parent is a “deadbeat parent” just looking to avoid paying, and several more factors.
First, lets review the strict “legal” issues. The filing of a Bankruptcy case immediately stays (or stops) a creditor’s efforts to collect a debt (click here for a description of the “automatic stay”). This is one of the most powerful tools in Bankruptcy, as it stops lawsuits, foreclosures, repossessions, garnishments, and other types of collection. However, there are a few exceptions. One of those exceptions is that the filing does not stay actions to establish or modify child support obligations, or the collection of child support and other domestic obligations from property that is not property of the estate, or the withholding of income to pay support if ordered by the family court or administrative agency. This means, in short, that the family court can proceed in determining or modifying support, and any withholding/garnishment of income and wages will continue. With respect to the collection of past-due (and current) payments, it comes down to what is or is not “property of the estate.”
In a Chapter 7 case, an “estate” is created for all non-exempt assets (if there are any) and the Chapter 7 Trustee will liquidate the assets for the creditors. For example, if the Trustee sells a house to get the equity for the creditors, the house and then the proceeds will be property of the Chapter 7 estate and the other spouse will be prohibited from reaching those assets, at least for a while. However, wages and income after the filing of the Chapter 7 case are not property of the estate, so the other spouse will not be stopped from reaching that money. The other spouse will have a “priority” claim in the Chapter 7 case and will be paid the estate funds before all (or most) other creditors (while continuing to pursue post-petition wages).
In a Chapter 13 case, where a 3-5 year payment plan will be proposed, future wages and income are property of the estate because those are the funds that will be used for the repayment plan. Therefore, the Chapter 13 plan and budget will normally include the payment of all current child support payments going forward plus an additional monthly amount that will pay all the past-due support by the end of the case. Unlike most other unsecured debts, the Chapter 13 Plan must provide for the full payment of all current and past-due child support payments by the end of the plan period so that when the case is over all payments are up to date. In addition, in a Chapter 13 case the debtor will normally retain all of his or her assets, including homes, bank accounts and so on. The other spouse may, and probably will, try to get at some of those assets to satisfy all or part of the past-due support, especially bank accounts or other assets that can easily be sold or liquidated.
Now lets move from the legal aspects to the practical aspects. First, and most importantly, the “good faith” of the parties in a court case is always important and that is especially true in both family court and Bankruptcy court. If the non-paying parent has a history of violating the court orders to pay support and other domestic obligations and the family court judge is of the opinion that the parent has no good excuse for not payment, a Bankruptcy filing may be viewed as just another attempt to avoid paying. If it has gotten to the point of contempt orders and the threat (or reality) of jail, it has probably reached that point. Importantly, any judge in any court has the authority to enforce its contempt orders, which is somewhat different than an order merely establishing a debt (such as the initial support order). The automatic stay may stop the collection of support but it does not generally stop a family court from jailing someone for refusals to comply with orders. If a family court judge has had enough of what they believe are bad faith attempts to avoid paying support, they can (and often do) jail someone even if a Bankruptcy case is filed. A Bankruptcy judge will not have the authority to order the release of the jailed person, even if it is arguably inappropriate.
In cases in which there is no bad faith, and the non-paying spouse is making a genuine effort to pay support, the other spouse may actually support a Bankruptcy filing (even if it takes a little time to get to that point). If the non-paying spouse has a lot of other unsecured debt, a Bankruptcy discharge of those other debts may free up future income so that more is available to pay current and past-due support or alimony. In a Chapter 7, the Trustee may be in a better position to find and liquidate assets for the other spouse who, again, may get most or all of those funds, and they may be able to get a portion of future income more easily. In a Chapter 13 case, they know that the Chapter 13 Trustee is overseeing the case and Chapter 13 Plan, and will send periodic payments to make up for past-due support (again, with the other spouse having a priority over other creditors). If current support payments and payments to the Trustee are not timely paid, the case will be dismissed.
Finally, one other important note. Virtually all Bankruptcy courts have held that obligations to pay the former spouse’s attorneys fees are treated the same as the actual child support payments. That means that those fees also get priority treatment in the Bankruptcy case, must be paid in full in a Chapter 13 Plan, and are excepted from discharge. In a recent meeting, a potential client had an obligation to pay his former spouse’s attorneys fees of well over $60,000 (and growing). That means a Chapter 13 Plan and budget would include an extra $1,000+ every month to pay those fees over a five year plan in addition to the amount necessary to pay back alimony and support, which is on top of his current monthly alimony and support payments. In many cases, the obligation to pay fees is more than the actual past-due support. His income will have to be sufficient to pay all this in a five-year plan.
If you are in this situation, the key is always to see a Bankruptcy lawyer sooner than later and hopefully before the debt gets so big it is not possible to manage, or you have exhausted the family court judge’s patience. A good Bankruptcy lawyer will be able to look at your income and other financial circumstances and see if Bankruptcy might be a great solution for you, your former spouse and, of course, the children.
Scott Riddle is a Bankruptcy lawyer in Atlanta, Georgia. The best way to contact us is by phone at 404-815-0164. You can also email scott@scottriddlelaw.com, or contact us through the contact page.