Bankruptcy is not only a financial crisis, but also a personal one.
It can strain the bonds of marriage, often leading to divorce and separation. When children are involved, conflict over child support will frequently arise, as parents struggle to meet their obligations or resist the other parent’s demands for payment.
Bankruptcy can be a great way to achieve a fresh beginning, by allowing certain debts to be wiped away after the bankruptcy period ends. However, it is important to understand the limitations of bankruptcy, particularly relating to child maintenance.
What is the statutory authority?
The Family Law Amendment Act 2005 is the statutory authority on the interaction between bankruptcy and family law.
Will filing for bankruptcy reduce my outstanding child support debt?
Filing for bankruptcy will not reduce the outstanding child support debt, nor does it automatically terminate the obligation to pay child support.
Can I stop paying my child support after I declare myself bankrupt?
An individual must continue to pay child support after filing for bankruptcy. The appointed trustee will manage the bankrupt estate and be responsible for outstanding or ongoing child maintenance.
A child support registrar has the power to pursue a bankrupt for outstanding child support, negotiate voluntary payment arrangements and request deductions from salary or wages. The trustee will negotiate with the registrar on behalf of the bankrupt.
Are there avenues to reduce my child support payments during bankruptcy?
A significant change in a parent’s financial circumstances (such as bankruptcy) can be grounds to reduce the child support payments. However, this is not guaranteed, and will require application to the court with strong supporting evidence.
After the bankruptcy period ends, am I released from the child support debt?
Maintenance liabilities are not automatically discharged by bankruptcy. The registrar can pursue the debt using legal avenues outlined in the Child Support (Registry and Collection) Act long after the bankruptcy period ends (3 years and 1 day).
Family law courts have extensive jurisdiction relating to bankruptcy matters. Bankruptcy is not a ‘fix-all’, and it is important to understand the nuance of your unique situation before filing. This is best achieved through professional advice from an insolvency professional or a solicitor.
To continuing reading see The Human Side of Bankruptcy
