Every American, whether residing in Outagamie, Wisconsin, or elsewhere, is likely well acquainted with the financial consequences of a marriage breaking down. If the couple chooses to file for divorce, apart from dividing up all marital property, the spouse awarded custody of children can also expect monetary support from the other partner, including payments towards raising the children and, in many cases, even alimony. As ordered by the court, it is automatically expected from the paying partner that such payments are met.
Nonetheless, with the recent economic recession affecting many Americans, many people have faced the specter of unemployment and high debts, leading to several financial problems, including missing support payments. An individual may end up filing for bankruptcy if the payer is unable to find employment for a considerable amount of time. If the person chooses to liquidate or sell off available assets to raise funds, usually the case with a Chapter 7 bankruptcy, support payments may be made using these monies.
If the debtor opts to reorganize debts in agreement with creditors, child support agencies may get involved to ensure that the debtor’s domestic support obligation is also accounted for. Per Wisconsin law, payments owed to a spouse or towards child support cannot be discharged along with other debt. In addition, although a bankruptcy petition imposes a stay on any collecting actions by debtors, some efforts by agencies to ensure payment of support amounts are still permitted.
Thus, while any amounts outstanding before the bankruptcy petition was filed are usually listed in the reorganization plan, payments pending while the petition is being reviewed can be met through withholding salaries, tax refunds, etc. Also, as long as the reorganization plan has not been approved, action may be taken to collect on arrears accumulated prior to the filing of the petition. It is, however, required that a Proof of Claim is filed in order to include child support and other due amounts in the repayment plan. The agency collecting support dues is required to cease and recommence all collection processes once the bankruptcy has been either discharged or dismissed, and may have to seek relief to do so.
Source: DCF.Wisconsin.gov, “Bankruptcy and Child Support,” accessed on Oct. 30, 2014