How Is Income From Child Support Treated in Chapter 7 Bankruptcy?

In almost every state, you can protect (exempt) child support you receive when you file for Chapter 7 bankruptcy. The trustee can't touch the money you get after you file, funds you'd already saved from support received before you filed (assuming you didn’t commingle them with other funds), and in many states, back child support you're still owed. How much stays protected depends on your state's exemption rules, so it pays to know where you stand before you file.

Child Support Received After You File Is Always Yours to Keep

Child support you receive after you file for Chapter 7 is yours to keep, no exceptions. But technically, it's not because of an "exemption." Your bankruptcy estate is fixed as of your filing date, so income you receive afterward, including child support, generally never becomes part of the estate in the first place. A few types of income are treated differently, such as inheritances, but child support isn't one of them. (11 U.S.C. § 541.)

Back Child Support Arrears: What You Can Keep

Whether you get to keep back child support owed to you depends on your state's exemptions, and many states protect it in full. Utah, for example, specifically exempts back support. Other states treat it the same as any other child support payment—a "payment necessary for the support of the child," and therefore exempt—though this depends on whether your state uses its own exemption list or allows the federal exemptions, which include a similar support carve-out. (11 U.S.C. § 554.)

Child Support Received Before You File Is Usually Exempt, Too

Money you saved from child support received before you filed is also exempt in most states, but you have to claim the exemption to protect it. If you have cash or money in a bank account that came from earlier support payments, that money becomes part of your bankruptcy estate along with everything else you own. Most states still let you exempt it, though, so the trustee can't use it to pay your creditors.

To claim the protection, list the money as an asset on your petition, then list it again as exempt property. You must be able to trace the funds back to child support, so you'll want to keep the money in an account that you use only for child support. Some states cap the exemption amount, so check your state's bankruptcy exemptions before you file. (11 U.S.C. § 541; 11 U.S.C. § 522.)

If You Owe Child Support, It Survives Bankruptcy

You can’t eliminate (discharge) child support that you owe by filing for Chapter 7. You’ll remain responsible for your monthly payments and any unpaid arrears once your case ends. If the trustee sells nonexempt property to pay your creditors, arrears get paid ahead of most other unsecured debt, like credit cards and medical bills, because the law treats them as a priority claim. Therefore, if the trustee sells some of your property, it could reduce your overall child support debt. (11 U.S.C. § 523(a)(5); 11 U.S.C. § 507(a)(1).)

Bankruptcy Doesn't Stop Child Support Collection

Here's how the exemption and collection rules stack up, depending on which side of child support you're on.

Chapter 13 Works the Same Way, With One Catch

The same exemption rules apply if you file for Chapter 13 bankruptcy instead, with one added requirement: if you owe back child support, your repayment plan has to pay it off in full, and you need to stay current on ongoing support to get your discharge at the end of the case. Before you file either chapter, check your state's bankruptcy exemptions, so you know exactly how much of your child support is protected, and talk to a bankruptcy attorney if you're not sure how the rules apply to you.