A support obligation is a very special kind of debt, and the resulting lien on your home has to be dealt with in a very special way.
Support—A Very Special Debt
If you are behind on child or spousal support then you owe a debt that is treated differently both outside and inside bankruptcy.
Before you file bankruptcy, your ex-spouse and support enforcement agencies have very aggressive tools they can use against you, your income, and your assets to try to make you catch up on unpaid support.
If you own a home, those tools include a lien that is very likely imposed on your home’s title in the amount that you owe.
Some of the support collection tools that can be used against you, including the support lien on your home, are affected when you file bankruptcy and some are not. It depends on the circumstances and especially on whether you file a Chapter 7 “straight bankruptcy” or a Chapter 13 “adjustment of debts.” Chapter 13 gives you a much more powerful way to fight back.
Chapter 7 vs. Chapter 13
Chapter 7 “straight bankruptcy” is not able to directly help with support debts. All it can do is write off all or most of your other debts. Then you would likely be better able to pay your ongoing monthly support, and also catch up on the unpaid back support.
But both during and after a Chapter 7 case you would have no protection from collection actions against you for the unpaid support. Any lien that you might have on your home for the unpaid support would remain on the title throughout that time. You would have no protection from actions against your home under that lien, including potentially a forced sale of the home to pay the debt.
In contrast Chapter 13 does stop your ex-spouse’s or support enforcement agency’s collection of unpaid support. A Chapter 13 payment plan that you propose with your bankruptcy lawyer specifies how you’re going to catch up on the unpaid support over a period of as long as 5 years. This payment plan is based on your real budget. So it can give you a very flexible way to catch up on what you owe.
Very importantly, unlike Chapter 7, as soon as you file your Chapter 13 case you get protection from collection of the support that is unpaid as of that date. This includes collection actions on the support lien on your home. So you can escape the huge pressure that these aggressive creditors put on you.
Chapter 13 Conditions
These Chapter 13 benefits have important conditions and limits.
Chapter 13 DOES protect you and your home from the collection of the part of support that you are behind on as of the day your case is filed. That’s what you have up to 5 years to catch up on (although it’s often paid faster to get it out of the way).
But Chapter 13 does NOT stop collection of ongoing monthly support payments (assuming that you continue to owe them). So you have to continue paying ongoing support.
It’s extremely important that you DO you pay those regular monthly payments during your Chapter 13 case. That’s because if you don’t keep making those ongoing support payments you could easily lose the protection Chapter 13 otherwise provides you against collection of the support that was owed as of the date your case was filed. You have to pay your ongoing support or else your ex-spouse and support enforcement agency would have grounds to resume collection action on that support arrearage. That would likely include the ability to foreclose on the lien against home, plus all of the other aggressive collection actions the law allows.
It’s also extremely important to keep up on the monthly “plan payments,” the amount you have agreed to pay monthly to the Chapter 13 trustee to distribute to your creditors. Those payments include money earmarked for catching up on the unpaid support. So if you don’t make any of those Chapter 13 payments, the trustee, your ex-spouse and/or support enforcement agency could inform the bankruptcy court that you are not catching up on the support payment as agreed. Then you could lose the protection you’d filed the Chapter 13 case to get.
But the Benefits Make this Worthwhile
The protection and flexibility provided to you by Chapter 13 really is extraordinary.
During your Chapter 13’s 3-to-5-year payment plan, you usually pay only a part of your overall debts. You often pay only a relatively small part of most of your debts so that you can focus on certain more important ones, such as the support arrearage. You may even pay nothing on most of your debts so that you can pay one or a few other debts.
As mentioned above, you are usually given the entire length of your case to catch up on your support arrearage. The amount of time is huge compared to what most ex-spouses and support enforcement agencies would otherwise allow.
You also generally can pay other important debts—such as unpaid home mortgage and/or vehicle payments—ahead of or at the same time as you are catching up on support.
The amount that you pay to catch up on support during your Chapter 13 case often just reduces dollar-for-dollar the amount you pay on most of your other debts. That’s because in most cases the amount you pay each month, and therefore the total you pay over the life of your payment plan, is based on what you can afford to pay. With usually a fixed amount going towards all of your debts, what you are paying to catch up on support just reduces how much you pay on most of your other debts.
Again, as long as you continue doing what you need to be doing, your ex-spouse/support enforcement can’t enforce the support lien nor take any other action to collect the support arrearage. Then at the end of the case you will be current on your support, and the lien will be released from your home.