The filing and disposition of a Petition for Bankruptcy with the United States Bankruptcy Court by a non-custodial parent affects activities for establishment, collection, and enforcement of child support orders by the CSE agency. Child Support Enforcement is considered a creditor and is prohibited from taking action to establish or collect support until the stay is lifted. Child Support Enforcement is not bound by this stay, since actions to establish paternity and actions to establish, collect or modify child support and spousal support are exemptions to such automatic stays.
Bankruptcy laws specify a priority system for collection of the debts of a debtor.
Additionally, child support and spousal support obligations are not dischargeable debts when found in a separation agreement, divorce, or other court order. The type of bankruptcy filed will affect the results for the creditors of a debtor. Other creditors, called unsecured creditors, will be paid a share of any other available resources. At the end of the distribution of monies, all amounts still owed to creditors are discharged. The plan can call for either full or partial payment of the debts owed.