Florida parents who are trying to declare personal bankruptcy may encounter some challenges if they are receiving child support. In fact, some people fear that their Chapter 13 bankruptcy may be dismissed altogether because they are receiving child support as “disposable income.” In many cases, Florida judicial authorities take a long time to confirm Chapter 13 cases involving child support; those cases may ultimately be dismissed or go to trial to determine whether the bankruptcy provisions are acceptable. Bankruptcy advocates say that parents who are receiving child support should be protected from unfair Chapter 13 proceedings, as the money is set aside for their children’s needs.
First, it is important to realize that child support can only be counted as income during bankruptcy if you are actually receiving the money from your children’s other parent. Further, the expenses that are related to raising your children – as delineated in your divorce decree – should be itemized and deducted from any household income when so-called “disposable income” is calculated. Sometimes, disposable income is not correctly calculated, and Chapter 13 payers can end up with massive monthly bills that completely negate the point of bankruptcy.
Further, those who are seeking Chapter 13 support should probably check to make sure that they are not eligible for Chapter 7 liquidation bankruptcy. Even if you earn more than the median amount for most Americans, you may be able to file for Chapter 7 protection because of your debt-to-asset ratio, also known as a “means test.” It is important to recognize the differences between these two options, as Chapter 7 bankruptcy will provide you with an entirely clean financial slate, while Chapter 13 requires ongoing reduced payments to creditors.
Your child support situation should not detract from your ability to file for bankruptcy. Qualified bankruptcy attorneys can help their clients learn more about the impact of auxiliary money on their financial status during their bankruptcy hearings.
www.huffingtonpost.com, “My child support is making my Chapter 13 bankruptcy tough” Steve Rhode, Dec. 11, 2013