A Look at Bankruptcy and Child Support

Many people paint with a broad brush when they think about bankruptcy. The assumption is that you get a fresh start and all of your debts are discharged when you file for bankruptcy. While this is generally true, the matter is much more complicated.

First of all, there are different forms of bankruptcy. Most individuals who are experiencing financial difficulties will file a Chapter 7 or a Chapter 13 bankruptcy. A Chapter 7 is a liquidation bankruptcy, and unsecured debt such as medical bills and credit card balances can be discharged if you file this type of bankruptcy. Plus, when you file for Chapter 7 or 13, you get an automatic stay as soon as you file. This prevents creditors from taking actions to collect on debts while the stay is in effect.

Child support falls under an entirely different category. The stay does not apply to ongoing child support. If you acquire property, including income, after you file, it will be outside of your bankruptcy estate. As a result, your earnings can be attached to satisfy your past due child support obligations. Of course, you will also be required to make your ongoing child support payments. Though your child support responsibilities will not go away if you file for Chapter 7, it may be easier to meet them, because other debts will be discharged.

A Chapter 13 is a reorganization bankruptcy. You maintain possession of your property when you file, and you agree to make manageable payments to your creditors. Your disposable income is used to make these payments and there is a priority to which creditors get paid first. Back child support has a high priority, so it will get paid before general creditors. The bankruptcy repayment plan will be designed to correct your child support arrears, and you will be required to continue to make timely payments as they become due.

Schedule a Free Case Evaluation

We have offices in many different cities throughout the state of Oregon, including Portland and Eugene, and we have locations in Vancouver and Tacoma, Washington. Our firm offers complementary consultations, and we will be more than glad to sit down with you to discuss your case. If you are ready to take action, we can be reached by phone toll-free at 1-800-682-9568.

Answers to Three FAQs about Bankruptcy in Oregon

We have been providing bankruptcy assistance in the state of Oregon for over 40 years, and we now have offices Portland, Eugene, Medford, Grants Pass, Coos Bay, Roseburg, Salem, Bend and a handful of additional cities. If you are considering the possibility of a bankruptcy filing in the state, you are going to have questions, and we can provide you with answers if you visit us in person. In the meantime, let’s look at the answers to three frequently asked questions about bankruptcy in Oregon so you can proceed with an underpinning of basic knowledge.

What are the different types of bankruptcy that are filed by individuals?

Chapter 7 and Chapter 13 are the forms of bankruptcy that are most commonly utilized. Chapter 11 is a type of bankruptcy that is used by businesses and a very limited percentage of individuals who have enormous levels of debt. Chapter 12 is a rarely used form of bankruptcy that is exclusively earmarked for family farmers and family fishermen.

How does a Chapter 7 differ from a Chapter 13 bankruptcy?

A Chapter 7 is a liquidation bankruptcy, so unsecured debts like medical bills and credit card balances are discharged. Plus, you can usually retain ownership of your car and your home if you are current on your payments. To be able to qualify for this type of bankruptcy, you have to be able to pass a means test. If your income is less than the median income in the state of your residence, you automatically qualify. It is possible to qualify even if your income does exceed the median if certain circumstances exist.

People who cannot qualify for Chapter 7 because they have too much income can file for a Chapter 13 reorganization. If you were to do this, you can keep all of your property, and your debt will be restructured. You will be required to use your disposable income to pay down the debt over a period of 3 to 5 years.

How long will a bankruptcy stay on my credit report?

It depends on the type of bankruptcy you file. Credit reporting agencies will erase a Chapter 13 bankruptcy after seven years. If you file for Chapter 7, the bankruptcy will remain on your credit report for 10 years.

Set Up a Free Bankruptcy Consultation

If you will like to take action after absorbing this basic information, we will be more than glad to assist you. We provide free initial case evaluations, so you can get to know us and learn more about the benefits of bankruptcy before you make any final decisions. To set the wheels in motion, send us a message through our contact page and we will get back in touch with you promptly.