This topic contains information on the following subjects:
Public Law 109-8, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), governs the disposition of bankruptcy petitions, including what actions can be taken by the CSS agency to establish and enforce child support obligations. Bankruptcy law at PL 109-8 is specific to bankruptcy petitions filed on or after October 17, 2005. It is not retroactive. For information on prior bankruptcy laws, consult the CSS agency attorney.
Bankruptcy laws specify how the available resources of a debtor are to be managed, including what actions can be taken by creditors and a priority system for the collection of debts.
Child support obligations are afforded priority number one (1).
Certain debts can be discharged in a bankruptcy plan, meaning that the debtor is not required by law to pay the debt. A child support debt that is owed either to the custodial parent (CP - coded "CLI") or to the
State is exempt from discharge by the bankruptcy court.
An automatic "stay" to prevent creditors from taking actions to collect debts while a bankruptcy plan is in effect does not always apply to child support matters. Bankruptcy law exempts actions to establish paternity and actions to establish or modify child support from such automatic stays. However, some restrictions on collection activities do apply to child support debts. For more information, see “Bankruptcy-Related Enforcement Policy”.
Chapter 7 bankruptcy is called a "straight bankruptcy" or "liquidation". Most debtors who file a Chapter 7 bankruptcy have few assets that can be distributed to creditors. The bankruptcy trustee reduces any available assets to cash and uses it to pay off the debtor's creditors.
Chapter 11 bankruptcy is called a "reorganization". It is filed by individuals or businesses who need time to restructure or scale back their business.
Chapter 13 bankruptcy is called a "wage earner plan". It is a court-supervised installment payment plan that does not require the approval of creditors. The debtor seeks the guidance of a bankruptcy trustee to devise and carry out a plan to make payments to the trustee, who pays this money to creditors. The plan can call for either full or partial payment of the debts owed.
A bankruptcy filing can be beneficial to CSS's efforts to collect child support, since the petitioner must disclose his/her full financial situation to the court, including all assets and liabilities.
In Chapter 13 filings, the noncustodial parent (NCP) is required to keep all post-petition payments current so that the bankruptcy plan remains valid. The bankruptcy court can dismiss the bankruptcy petition and/or payment plan if the NCP fails to pay ALL of his/her child support obligations in full and on time. Once the payment plan is completed under either Chapter 7 or Chapter 13, some of the NCP's debts can be discharged. Child support debts to the State or to the custodial parent (CP) are not dischargeable. Prior law allowed debts owed to the State to be discharged.
The trustee also has the duty to provide information about a domestic support obligation to the CSS agency. A "domestic support obligation" is defined in part as "a debt that accrues before, on, or after the date of an order of the bankruptcy court and that is owed to a spouse, former spouse, child of the debtor or such child's parent, legal guardian, or responsible relative or a governmental unit in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child's parent.”
Once the trustee is aware that a domestic support obligation exists, the trustee has certain responsibilities which include:
After the bankruptcy petition has been successfully completed, the CSS agency can contact a creditor listed in the petition who still holds a claim or debt and request that the creditor reveal the NCP's last known address.
CSS workers MUST notify the CSS attorney as soon as they become aware that a noncustodial parent (NCP) has filed or might have filed a bankruptcy petition. The CSS attorney should contact the US Bankruptcy Court to verify the filing, that the court is aware of the child support obligation and to determine what enforcement actions can be taken. No action should be taken in the case, until the CSS attorney advises the responsible worker of the bankruptcy court's response.
Until lifted, the "automatic stay" prohibits CSS from taking certain enforcement actions.
CSS workers CANNOT:
CSS workers CAN pursue the following actions without requesting that the "automatic stay" be lifted by the bankruptcy court:
For questions or clarification on any of the policy contained in these manuals, please contact your local county office.