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  • Chapter 7 Bankruptcy and Child Support: What You Need to Know

    Due to the integration between Chapter 7 bankruptcy law and child support complications, which are a regular part of people’s lives lately, people need direction on how to properly deal with debts with the money they earn from their jobs to pay child support for their kids. To completely understand this bankruptcy law, people need to know first the fundamentals of Chapter 7 bankruptcy and how it relates to child support & that is exactly what we are here for!

    Child Support Dynamics in Bankruptcy

    Adding child support payments to the pile of issues you must navigate during your Chapter 7 bankruptcy is likely something other than what you want to hear. However, child support payments are not something that you can “put off” when you file for bankruptcy. Bankruptcy has huge implications vis-a-vis child support obligations.

    This chapter reviews the practical aspects of handling child support when you are in the midst of bankruptcy. We discuss how bankruptcy affects child support payments, including ongoing support and any arrears you owe.

    We also explore establishing child support as a priority for debt relief within your bankruptcy estate and the bankruptcy court’s role in addressing domestic child support creditors and obligations. By grasping these practicalities, you will be more adept at juggling your financial obligations while going through the Chapter 7 bankruptcy process.

    The connection between the Chapter 13 bankruptcy and 7 Bankruptcy and Child Support payments

    Chapter 7 Bankruptcy Explained

    If you’re approaching Chapter 7 bankruptcy and owe child support, knowing just how it impacts you is essential. Chapter 7 bankruptcy offers the debtor a fresh start while paying off debts. How does this apply to your child support? This section comprehensively explains Chapter 7 bankruptcy and what happens to your child support while employing Chapter 7 bankruptcy techniques.

    What does it mean to discharge child support debt and file bankruptcy? Why is child support a priority debt in bankruptcy? The actual day-to-day dealing with the bankruptcy court and your child support will also be addressed. With this practical knowledge, you will have everything you need to make an informed decision regarding your child support obligation while going through Chapter 7 bankruptcy.

    Child Support Legalities Amid Bankruptcy

    Chapter 7 bankruptcy is not a “child support elimination” plan, even if they are tough to pay. The statutes are very certain as they refer to the treatment of kid support debt. Kid support debt is one of the very few debts that are not dismissed, with ongoing kid support to be paid after the bankruptcy is over and any past-due kid support owed when the bankruptcy begins to stay owed after the bankruptcy is done.

    Kid support is what bankruptcy laws term a “priority debt,” indicating it is given preferential treatment in the bankruptcy process. Kid support is a ground that requires to be considered by the bankruptcy judge first to determine how much money must be paid each period in kid support.

    If the judge identifies that domestic support obligations should be paid, then that sum of cash must be paid first and every month before anything else. Most of the exacting laws and the bankruptcy judge help ensure that domestic maintenance obligations are paid, as they are called officially.

    Managing Financial Responsibilities

    Mastering Financial Responsibilities, especially when experiencing Chapter 7, is critical because one has a continuous obligation on the issue of child support. Under the bankruptcy process, you will work closely with the bankruptcy trustee to evaluate the financial position, including income, assets, and liabilities.

    Although bankruptcy might provide you with a fresh start in your financial life, you should note that child support, considering the child’s welfare comes first, is considered a priority debt and, therefore, cannot be discharged.

    Therefore, you should master the art of managing your finances since you must have a budget to ensure you can meet your child support obligation, which is a legal requirement. A realistic budget that prioritizes paying child support can allow you to maintain the obligation of caring for your children even- though you are struggling financially.

    Chapter 7 Bankruptcy in relation to child support

    Child Support Modifications in Chapter 7

    If the changes in your financial life after filing for a Chapter 7 bankruptcy are significant enough, you could be compelled to request modifications on child support agreements. If you have filed for bankruptcy and had a dramatic decrease in income, modifications to the child support agreement could be requested through legal means.

    You must consult a lawyer with a specialty in family law who could give you a synopsis of the entire legal process of modifying child support due to a bankruptcy proceeding. However, it is important to continue paying back child support at the initial child support amounts as agreed in the child support agreements until you have received your admission of modifications through a court of law. Making the changes without the notification of courts of law may cause you legal harm.

    Balancing Family and Financial Stability & Child Support Payments

    Balancing family care and financial stability can be a challenge when filing for bankruptcy under Chapter 7, especially if you still owe child support and are currently making payments. The most important rule is to keep the custodial parent in the loop about the status of your bankruptcy case and any changes during the duration of the bankruptcy. A good working relationship can be helpful in maintaining open lines of communication to handle any stumbling blocks that may arise during this period of your bankruptcy filing.
    Regardless of your situation, however, child support remains a priority. This means that your household budget must include a provision for child support, taking priority over other debts or expenses that are not dealing with ongoing child support alone.

    Get Help With The Pope Firm

    Facing legal challenges is often an overwhelming experience; Pope Firm is here to help you through. With our team of dedicated, experienced attorneys working to make your experience as easy as possible, we will help advise in complicated areas of the law.

    Our pride is in serving our clients and finding the best solutions for them, not all creditors, ensuring their complete understanding and support of our approach. We will work with you for bankruptcy, family law, and other areas under our team’s jurisdiction! Our goal is to achieve everything to the best of our capability, standing by your side to answer all your questions and address any concerns; we are simply here for you. When you decide on Pope Firm, you are represented fully.

    If you need assistance with personal or business bankruptcy and filing in Tennessee, reach out to The Pope Firm and Charles Pope, Attorney At Law.

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    Frequently Asked Questions

    Bankruptcy occurs when an individual, business, or other entity declares the inability to repay its debts. If you file for bankruptcy, that means that debt collectors must pause attempting to collect debts from you. Bankruptcy often allows you to erase most, if not all, of your debts.

    There are two types of debts, unsecured and secured. Some examples of unsecured debts are credit card bills, medical bills, or taxes. Secured debts can include car loans or mortgages, which use the purchased item as collateral. In many cases, filing for bankruptcy can keep this collateral protected and prevent foreclosure of your home or repossession of other assets.

    Bankruptcy is governed by federal legislation under the Bankruptcy Code, which falls under the greater United States Code. Both federal law and local law inform the bankruptcy procedure. Federal bankruptcy judges, appointed by the United States court of appeals, preside over court proceedings in these cases. In court, the judge and a court trustee, review your finances to determine whether or not to discharge the debts at hand.

    Each state has one or more bankruptcy courts. Tennessee has six bankruptcy courts throughout the state.

    Filing for bankruptcy can be a daunting process, and working with a firm with expertise in the field can provide you with necessary guidance.

    There are several types of bankruptcy. Most individuals, married couples, and small businesses choose to file under Chapter 7 or Chapter 13.

    What are the Differences Between Chapter 7 and Chapter 13?

    The primary difference between these two types is that Chapter 7 bankruptcy allows an entity to fully discharge its debts in a short period. A Chapter 13 bankruptcy involves reorganizing debts and creating a plan to repay those debts over an allotted time. After that time, Chapter 13 eliminates most of the remaining debts.

    Chapter 7 bankruptcy is typically filed by those with very limited income and unsecured debts, the most common of which is medical bills. Chapter 13 bankruptcy is most often filed by higher income bracket individuals and those with more assets, such as a car or a home. The motivation for filing Chapter 13 bankruptcy is often preventing assets from being repossessed or home foreclosure due to outstanding debts.

    What Other Types of Bankruptcy Are There?

    Two other types of bankruptcy are Chapter 11 and Chapter 12.

    Chapter 11 primarily applies to larger companies and corporations, but sometimes it is the right choice for small businesses as well. Chapter 12 applies to those who are considered family farmers.

    Various considerations get factored into who should file bankruptcy. Filing bankruptcy may be the right choice for you if you are overwhelmed by debt. Regardless of what type of bankruptcy you file, as soon as the process begins, you are granted an automatic stay. A stay is an injunction that prevents creditors from collecting any debts for an allotted time. An automatic stay halts the process of, for example, foreclosing on a home or repossessing a vehicle.

    A Chapter 7 bankruptcy will discharge most of your debts. Filing Chapter 7 is appropriate for those who make less than the median household income in Tennessee and whose assets would not be at risk. In this situation, your non-exempt property is sold to pay off creditors.

    Chapter 13 bankruptcy allows you to create a plan to repay your debts. If you have non-exempt property used as collateral in secured loans, you can restructure your finances to pay off any relevant debts over the next three to five years. Chapter 11 functions in a similar way, but is exclusively for businesses.

    Filing for bankruptcy can provide a fresh start for those bogged down with debt, either by restructuring finances or discharging debts entirely.

    How bankruptcy affects business depends upon the type of bankruptcy filed.

    Chapter 11

    Businesses classified as corporations, partnerships, or LLCs can file Chapter 11 bankruptcy. Chapter 11 allows for debt restructuring, while the business stays open. As in Chapter 7 and Chapter 13, an automatic stay activates as soon as your bankruptcy period begins. In an automatic stay, creditors cannot try to collect money or other assets from you.

    During this period, you work with your lawyer to restructure your debts and develop a plan to get your business back on track. This plan must be approved by some of your creditors and a bankruptcy court to go forward. You will be able to repay your debts over several years.

    Chapter 7

    Filing Chapter 7 bankruptcy discharges all of your business’s debts by liquidating your assets. The entire process can be completed quickly, often in several months. Chapter 7 allows for the discharge of most debts, excluding government taxes and fines.

    Chapter 13

    Only individuals can file for Chapter 13 bankruptcy. Thus, although businesses cannot file, you can file Chapter 13 as the sole proprietor of your business.

    When you decide to begin the bankruptcy process, the first step is to find a lawyer who is an expert in filing bankruptcy in Tennessee. Hiring a bankruptcy lawyer can indeed be expensive, but it is worth the cost. This professional can guide you through what type of bankruptcy is best for your situation and what to expect throughout the process.

    • Collect your documents: It is important to have everything from your paystubs to your credit report available before starting.
    • Take the means test. This test will determine if you are eligible for Chapter 7 bankruptcy and help guide you in making a repayment plan for Chapter 13 bankruptcy.
    • Meet with a credit counselor. In the state of Tennessee, most individuals must meet with a credit counselor from an approved provider before filing for bankruptcy.
    • Fill out bankruptcy forms. If working with a lawyer, you can expect they will use online programs to help you file your paperwork.
    • Pay your filing fee. It costs $335 to file for bankruptcy in Tennessee. Waiver of the fee is possible in some cases, but it is uncommon. However, it is possible to pay the fee in several installments instead of the entire balance upfront.

    Declaring bankruptcy wipes out many debts, but not all.

    What Debts are Usually Covered by Bankruptcy?

    Bankruptcy can clear most unsecured debts, including:

    • Credit card bills
    • Medical bills
    • Overdue utility payments

    Bankruptcy can also clear many secured debts, but it depends on whether you file for Chapter 7 or Chapter 13 bankruptcy. For Chapter 7, you will have to give up any non-exempt items you put up for collateral. For Chapter 13, they will become part of your repayment plan.

    What Debts Are Not Covered by Bankruptcy?

    • Child support
    • Alimony obligations
    • Those related to personal injury or death in a drunk driving case
    • Any debts not listed on your bankruptcy papers

    No type of bankruptcy covers these debts. If you file for Chapter 7, they remain outstanding. Under Chapter 13, you pay these debts along with your other debts.

    What Debts May Be Covered?

    Bankruptcy rarely covers student loan debt. However, it may be in some cases with proof of undue hardship.

    Tax debt is also rarely covered, but bankruptcy may cover certain old unpaid taxes.