Chapter 13 Bankruptcy: Taxes and Child Support

A Chapter 13 bankruptcy case can be used to pay child support arrears and tax liability for prior years. However, in order to stay in a bankruptcy case, debtors must continue to pay child support during the pendency of the case and they must file future tax returns and make arrangements to pay future taxes as they come due.

The Northern District of Texas takes this requirement a step further and requires that after filing Chapter 13 bankruptcy but before confirmation of the plan the debtors provide a sworn statement that they have paid all child support payments that have come due between the date the bankruptcy case was filed and the confirmation hearing. Chapter 13 debtors in this district must also sign a sworn statement that they have filed all tax returns due at the time of confirmation.

If during the pendency of the bankruptcy the debtor falls behind on taxes or child support they may be able to modify their Chapter 13 plan to allow them to include these post-petition claims in the plan. However, including these claims in the plan may make it difficult or impossible to complete the terms of the modified plan, because the debtor may not have enough income to pay the higher payment. It is important that debtors calculate their tax withholdings correctly so that they do not have unexpected tax liability at the end of the year and to continue making their child support payments. Failure to take these steps can make completion of the Chapter 13 plan impossible and prevent discharge in the bankruptcy case.