Behind on child support? Chapter 13 bankruptcy might help
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Child support payments are important, but if you’re weighed down by other debt, you might find you’ve fallen behind. Being delinquent on child support is a risky situation because the state of North Carolina’s Child Support Services has many tools for collection enforcement. If you’re behind on child support and other debts, Chapter 13 North Carolina bankruptcy might help you. Here’s what you need to know.
You Can Be Garnished for Past-Due Child Support
North Carolina Child Support Services (CSS) can garnish your wages if you’re behind on child support. Garnishment is just one of the things CSS can do to you, and it can be financially devastating. North Carolina doesn’t allow general creditors, like credit card companies, to garnish your wages for any past-due debt. But CSS can take 40% of your wages for child support if you’re in the habit of paying late and your child’s custodial parent appeals to CSS for assistance.
If you have more than one withholding order against you, CSS can take up to 65% of your wages depending on whether or not you’re supporting a second family and whether you have delinquent alimony payments as well. It can be hard to live on 35% of your earnings, so digging yourself out of the delinquency can be life-changing. Chapter 13 might be a solution if you’re in a bad situation with your child support or alimony payments.
Chapter 13 Automatic Stay Might Stop Negative Consequences
When you file Chapter 13, an automatic stay goes into effect that blocks normal creditors (credit card issuers, your mortgage or vehicle lender, etc.) from hassling you over past-due debt. Once you file, CSS must work within the limits of the bankruptcy system to get the past-due amounts. Filing Chapter 13 helps with your delinquent child support or alimony, but you will still be required to pay the current monthly amount. Here’s an example of how this works.
Say you are behind $5,000 in child support or alimony when you file Chapter 13 and your normal monthly amount is $500. You would have to continue paying the $500 a month as usual, but the $5,000 delinquent balance would become part of your Chapter 13 repayment plan as a priority debt. Priority debts are those that are paid first and cannot be reduced or discharged as part of your bankruptcy plan. However, Chapter 13 can also help free up money to meet these demands.
How Chapter 13 Bankruptcy Works and How It Can Help
If you make enough money to cover your current child support obligations and living expenses, but fell behind because of a circumstance such as temporary unemployment or an accident or illness that caused your income to drop or expenses to increase (or both) in the short-term, Chapter 13 may help. Your past-due balance for your child support is first in line but also among the priority debts are delinquencies for your mortgage or auto loan, recent income taxes, attorney fees for your bankruptcy and Chapter 13 attorney fees.
Your medical bills, credit cards, older qualified income taxes, and certain other unsecured debts go to the back of the line and out of your hair. Filing bankruptcy can create breathing room in your budget. The plan lasts three to five years, but usually five years, so if you’re behind on child support the $5,000 mentioned above, that’s $1,000 a year you’ll pay on that debt which is less than $100 a month over the life of your plan. That’s a much better deal than you’re likely to get from CSS. When you come out of Chapter 13, you should be current on priority and secured debts, and remaining balances on unsecured debts like credit cards and medical bills are usually discharged.
Alternately, if you can’t keep up with the payments of a Chapter 13 repayment plan with your existing debt, you might be able to qualify for Chapter 7 and wipe out your unsecured debts to free up funds in your budget. Then, if you’re still struggling to catch up on your child support, you could file a Chapter 13 after your Chapter 7 discharge. However, the best way to get started is to consult an experienced North Carolina bankruptcy attorney about your child support delinquency.
To find out more about the benefits of Chapter 13 or Chapter 7 bankruptcy, contact the Law Offices of John T. Orcutt. Call 1-888-234-4181 now for a free North Carolina bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.