When people hear “bankruptcy,” most people probably assume that a person is going through a Chapter 7 bankruptcy. It is a relatively quick form of bankruptcy (usually lasting months) that allows the filing individual to get rid of old unsecured debts. Now, other debts that are “secured” must be dealt with, usually through the liquidation of certain assets. Ultimately, though, a Chapter 7 bankruptcy can be very helpful for someone in debt.
There is another form of bankruptcy though that is quite popular, despite the fact that it may not be one of the first things you think about when the word “bankruptcy” comes up. It’s called a Chapter 13 filing, and it is particularly helpful for those who are looking to protect major assets, such as a home.
A Chapter 13 filing is known as the debt reorganization plan. Through this filing, you can consolidate your debts into easier monthly payments, thus buying you some time to regain your financial footing. An added bonus to the Chapter 13 filing is that it can protect your home from foreclosure.
But what happens when you have gone through a divorce and you are receiving spousal support or child support? How does that affect a bankruptcy filing? Well, it counts as income, so it could alter your Chapter 13 filing — however, you have to actually receive the financial support for it to count. Remember that each bankruptcy case is unique, and there can be a variety of factors that need to be considered. It is best to have a capable and knowledgeable advisor during these times so you know what to do with your bankruptcy filing.
Source: Huffington Post, “My Child Support Is Making My Chapter 13 Bankruptcy Tough,” Steve Rhode, Dec. 11, 2013