The Effects of Bankruptcy on Child Support in Australia: What You Need to Know

This article will provide a comprehensive overview of how bankruptcy can affect child support obligations. Understanding the implications of bankruptcy on child support is crucial for individuals facing financial difficulties while at the same time being responsible for supporting their children.

At the Bankruptcy Advisory Centre, we can help you navigate the complexities of declaring yourself bankrupt while maintaining your child support obligations.

Child Support in Australia

Child support in Australia is a legal obligation that ensures parents contribute financially to the upbringing of their children, even in the event of separation or divorce. The Child Support Agency (CSA) administers the child support program, and child support payments are calculated based on the income of both parents.

Bankruptcy on Child Support

When an individual who is liable for child support faces financial hardship and considers bankruptcy as an option, it’s important to understand the impact on their child support obligations.

Ongoing Child Support Payments

• Bankruptcy does not eliminate or discharge child support obligations: Child support payments are considered a priority debt and must continue to be paid during and after bankruptcy.
• Income Contributions: If the bankrupt individual’s income increases during their bankruptcy through increased earnings or assets, it may result in higher child support payments. The Child Support Agency will assess the income and adjust the child support amount accordingly.
• Income Contributions during Bankruptcy: Income contributions made by the bankrupt individual during their bankruptcy period are considered part of their assessable income for child support calculations. This means that a portion of the income contributions must go towards child support payments.
• Impact on Debt Repayment: While bankruptcy may provide debt relief for certain creditors, child support payments remain unaffected. These payments are not discharged in bankruptcy, and any arrears must be repaid.
• Notification to the CSA: It is essential for individuals considering bankruptcy to notify the Child Support Agency of their financial situation. This includes informing the CSA about the intention to declare bankruptcy and providing accurate financial information.
• Consider Legal Advice: Individuals facing bankruptcy and child support obligations may also wish to seek legal advice from a divorce or child support lawyer to ensure they fully understand their specific circumstances and obligations. Legal professionals can provide guidance on navigating these complex issues, and if required, we can refer you to legal professionals who can help you with these matters.

Child Support and Bankruptcy Alternatives

Before considering bankruptcy, individuals should explore alternative options to address their financial difficulties while meeting their child support obligations.

• Negotiate New Arrangements: It may be possible to negotiate temporary changes to child support arrangements with the other parent or through the Child Support Agency based on changed financial circumstances.
• Seek Financial Counselling: Before bankruptcy, you must understand all available options and make informed decisions. At the Bankruptcy Advisory Centre, we will make a tailored plan that suits your financial circumstances.
• Court Orders: In some cases, individuals may need legal assistance to modify child support orders through the family court system.

It is important to remember that bankruptcy in Australia does not absolve individuals of their child support obligations. Child support payments remain a priority debt, and bankruptcy primarily addresses other types of debt.

Individuals facing financial challenges and child support responsibilities should seek legal and professional advice, communicate with the Child Support Agency, and explore all available options when considering bankruptcy on child support. At the Bankruptcy Advisory Centre, we can help you understand the implications and navigate this complex landscape while ensuring the well-being of your children and that you meet your child support obligations.