People on a tight budget who get divorced may worry about getting by. Some divorced parents rely on child and spousal support. If a financial situation becomes dire enough, a paying or receiving parent could file for bankruptcy.
It is important to understand what will likely happen when a divorced or single parent files for bankruptcy. Naturally, a parent who depends on support payments may want to know what will happen if the paying parent goes bankrupt.
Support is not eligible for discharge
Bankruptcy allows a court to declare that a debtor does not have to pay off some debts, provided that they qualify. The government will not allow the discharge of certain debts.
U.S. News and World Report explain that both spousal and child support fall under this category. A paying parent cannot use bankruptcy to get out of providing support to an ex-spouse. The obligation to pay back support and continual support remains even after the bankruptcy is complete.
Creditors cannot claim support payments
Some parents who receive support file for bankruptcy. However, they may fear that creditors will collect their child and spousal payments even in bankruptcy. Bankrate points out that some income and benefits receive protection from collections. These include the following:
- Spousal support
- Child support
- Life insurance payments required for support
- Social Security benefits
Other exemptions cover different kinds of benefits relating to unemployment, having a disability, being sick or having served in the military. Many situations allow debtors to keep much if not all of their retirement accounts.
Basically, bankruptcy law exists to help relieve people of burdensome debt, not to circumvent the obligations of family law or deprive a parent of child or spousal support.