Hearing the terms bankruptcy and child support together is never good. As a parent, you must be financially capable to have the right to see your child. When parents find themselves in a dire situation and can no longer commit to basic financial needs, bankruptcy may be one of their options to clear them off their debts. A debtor can only deal with so much when they have liabilities with child support along with their other financial matters.
This article will discuss bankruptcy and child support and how they correlate to each other.
Glossary of terms in this article:
Trustee – A trustee is a person who has the responsibility to manage assets that have been set aside in a trust for the benefit of another person. This means that the bankrupt party does not have means of possessing their assets.
Creditor – Refers to the party that has delivered products, services, or loans and is owed by the debtor or bankrupt person.
When Is a Person Declared Bankrupt?
Think of it as an individual’s money going negative for instance. A person is in bankruptcy when they do not have sufficient assets or the means to pay his debts. They are only allowed to keep the most basic possessions like pieces of furniture, tools for trade, and clothing.
The natural concern of maintaining child support while being bankrupt is inevitable. This won’t also save the bankrupt person from paying off his child support payments.
Bankruptcy And Child Support Payments In Australia
There are two things to note when having financial obligations with child support:
- The tax return in your previous year shall be used to estimate your income for the upcoming year. Make sure to accurately record up-to-date tax returns to ensure that the child support payments will be equivalent to your actual income. This prevents you from allocating more payments than what is needed.
- Your solicitor will look into the division of care between the child’s parents/guardians as they will aim to provide security to the child’s rights in receiving financial support.
The Department Of Human Services (DHS) leads the child support assessment scheme in Australia. Parents need to ensure that they tell the department of any changes in their child support and provide information that will help the DHS in calculating their child support payments. In relation to bankruptcy and child support, your obligations will be determined by your income and the percentage of your care for the children involved. This is essential as you may have the risk of having payments way over your actual obligations or incur a huge child support debt.
Given that your tax income changes before a new assessment is available, you can request the DHS to use your estimated and adjusted taxable income to calculate your obligations. This can be done if the existing payments are already based on your tax return’s adjusted income and if your current adjusted income is at least 15% less than the income that you are using in your current assessment.
Debt In Bankruptcy and Child Support
Bankruptcy and child support does cover a lot of debts, but the latter isn’t one of them. Here are several unsecured debts that bankruptcy can cover:
- Credit Cards
- Unsecured loans (payday and personal)
- Utility bills
- Overdrawn bank accounts and unpaid rent
- Medical, accounting, and legal fees
The child support debt will not exempt the bankrupt person from paying it off as it is made sure by the Australian Government not to be compromised in cases like these. There are legal remedies under the Registrar to enforce payment of child support to the bankrupt parent. These may include:
- Filing an action against the property that was not vested to the trustee
- Lodging a claim with the trustee
- Lodging a notice of debt with the trustee; specified with penalties and child support debt
- Negotiate with the bankrupt person for voluntary payments, deduction of child support payments from the salary, and interception and application of taxation refunds
Bankruptcy usually lasts for three years unless the bankrupt person applies to the court for early discharge. According to the Bankruptcy Act Section 153, a bankrupt person can be relieved from all of his debts when discharged from bankruptcy, however, child support payments must still be collected even after the discharge of the bankrupt person.
Rights Of The Bankrupt and Non Bankrupt Parties
The assets of the bankrupt person go straight to the control of the trustee. A trustee is a person who has the responsibility to manage assets that have been set aside in a trust for the benefit of another person. This means that the bankrupt party does not have means of possessing their assets. The bankrupt party can no longer also transfer property in accordance with any order for property settlements.
When a party is declared bankrupt, they’re no longer obliged in complying with pre-action processes like mediation in Family Law. Unless the court gives permission, the bankrupt party is not entitled to make submissions to the court relative to the property that’s in control of the trustee. However, the bankrupt party does have the right to make submissions relative to the property owned by the non-bankrupt partner that’s not with the trustee.
The non-bankrupt party on the other hand may make an application to the court for an injunction. An injunction’s purpose is to stop the trustee from declaring or giving out any assets to the bankrupt party’s creditors before any matters are resolved. An order is made for child support payments to the bankrupt party and the other party can enforce these with court proceedings.
Why Legal Advice Is Essential In Dealing With Bankruptcy and Child Support
Bankruptcy and child support is a stressful matter to deal with, especially since there are financial matters that are involved. Creditors and trustees are also a part of the processes mentioned above and dealing with them without being prepared can be stressful too. Not to mention the child support involved in these as a bankrupt parent is not exempted from paying off all of these right off the bat.
An individual doesn’t want to deal with child support while paying off their debts under legal procedures, so that’s where JB Solicitors can come in. Our team of civil disputes and litigation experts specialise in handling debts and bankruptcy to aid our clients in taking the best path in resolving these types of cases. Our services offer fixed fees as well to assist in lessening your financial worries.
Contact JB Solicitors today.