Child care, among other costs, continues to rise. Parents across the country are facing more debt than ever before and debating if bankruptcy is the right direction. Filing is complicated, and having children does not make it easier. Learning about how bankruptcy affects child care will help you make the best decision for you and your family to become financially stable.

Child Care And Bankruptcy

Many parents aren’t sure about how or if they can continue supporting their children if they file bankruptcy. When filing for bankruptcy under Chapter 7 or Chapter 13, your appointed trustee will look at your overall circumstances and allow you to continue to pay for all necessities - including child care. The average amount allocated for child care is up to $1,000 per month. Specifics differ from case to case and depend on what chapter you file under.

Chapter 7

Chapter 7 bankruptcy will discharge most, if not all, of your unsecured debts. Once this process is complete, your future income will start to go towards living expenses, such as child care, instead of being used to pay off debt, creating a more financially stable home. This chapter is usually the easiest and quickest way to debt relief for families.

Chapter 13

Unlike Chapter 7, with Chapter 13 bankruptcy, your income is used to pay off creditors through a payment plan. The court will create the plan and only use disposable income to pay off your loans, which is whatever is left over after purchasing all basics, including what is needed for your children. Under this chapter, you must budget more to ensure you stay on your payment plan and do not overspend.

Do Children Affect Qualification?

Chapter 7

While child care expenses can put a lot of stress on your finances, they may also help you qualify for Chapter 7 bankruptcy. A means test determines Chapter 7 eligibility, which measures your income compared to the state median. Child care costs may be deducted from your income, causing it to seem lower than it really is and helping you pass this means test.

Chapter 13

Child care will not affect your eligibility for Chapter 13 filings. These expenses may even qualify you for lower amounts to be paid back to creditors on your payment plan. Again, your child care expenses will be prioritized when your trustee assesses your finances.

Bankruptcy And Child Support

In many cases, parents filing for bankruptcy also pay or receive child support. It is essential to understand the effect bankruptcy will have on both of these situations.

Paying Child Support

There are a few ways in which bankruptcy may affect child support payments. If you’re the parent obligated to pay child support, the court may require you to continue making payments, regardless of the filing status. The court may modify the payment amount based on your financial circumstances.

If you're behind on your child support payments, you will not be able to get this debt discharged, but you will be able to prioritize your child support debts when you make your payment plan in a Chapter 13 bankruptcy.

Receiving Child Support

If you are the parent receiving child support payments, the money you receive is considered disposable income, meaning that if you file for Chapter 13 bankruptcy, the court may require you to use some of your child support to repay your creditors. However, there are certain circumstances where you may be able to keep part or all of your child support payments if they are needed for basic necessities.

Bankruptcy And Custody

Bankruptcy can have several different impacts on your life, but one of the most important is how it can affect your custody arrangement. In general, bankruptcy will not lead to a loss of custody, but there are a few circumstances where it could be a factor.

If you have large debts causing financial strain or have filed for bankruptcy multiple times, this could negatively impact your ability to provide for your child. However, in most cases, bankruptcy will not impact your custody arrangement.

It is recommended that you consult with a bankruptcy attorney in whatever situation you are in. Having a professional to discuss your options will lead to the best possible outcome. Use this online tool to find an attorney near you.

Conclusion

Filing for bankruptcy can be a fresh start for you and your family and create a financially stable home. Child care should not hold you back from receiving debt relief. Instead, bankruptcy should be a tool for handling child care costs and creating the best future for your children.