Good to see that MBNA’s bill was written with some political cover for its supporters in Congress and lip service to single mothers. But somehow I don’t think MBNA has been pushing this bill for years out of its concern for the plight of custodial parents.
In fact, I don’t see how this bill (taken as a whole) affords a practical benefit to non-custodial parents.
Before this bill:
A father who owes child support gets over his head in debt. He has creditors hounding him from all directions. He files for a Chapter 7 bankruptcy. His credit card bills are wiped out. His child support payments survive the bankruptcy and now with the credit card bills gone he can focus his economic energies on supporting his children.
After this bill:
Chapter 7 bankruptcy may be disallowed. Hypothetical dad is put on a repayment plan. Now the mother of his children is competing for his (stretched-thin) financial resources with the credit card banks and other creditors. Maybe hypothetical dad defaults on his payment schedule (as often happens) and his bankruptcy is dismissed. Now hypothetical mom is back to competing directly with credit card lenders to try to get hypothetical dad’s assets. Maybe hypothetical dad drops out of the work force entirely out of frustration, or moves away to another state to try to escape his creditors.
Somebody tell me how the single or divorced mother is better off in the second scenario, because I’m not seeing it.
Well, no. I don’t think you’re right in that the guy’s child support payments do survive the bankruptcy in Chapter 7. Obviously, any future child support payments do (because they’re not debts), but his delinquent payments get settled along with all his other debts in the liquidation.
One of the things this bill does is to give child support and alimony primary in payment.
Here’s another link to 11.507 that might work better?
Priorities determine what gets paid first from any assets of the debtor which are liquidated and/or paid into Bankruptcy Court. As I mentioned, priorities only matter while the bankruptcy case is pending.
That’s a separate issue from what debts survive the bankruptcy.
First, thanks to Captain Amazing and to you for finally going to actual documents.
You are correct that child support is generally non-dischargable (but see below). You complain that the increase in priority is “window dressing” which applies only during the pendancy of a bankruptcy. In the case of Chapter 13 this can be up to five years – puberty through high school graduation, for example. Not insignificant as far as I’m concerned. In the case of Chapter 7 arrears get paid earlier rather than later (or more commonly, not paid at all and added onto the debtor’s post-bankruptcy liabilities). In other words, when the debtor’s assets (if he has any) are sold the proceeds go to mom before they go to the credit card company. In practical terms, this may not be signficant – the whole reason someone wants to choose Chapter 7 over 13 is that he’s short unencumbered assets and long income. But I still think it’s an important principle.
It’s funny that you cite (a)(5). See any potential loopholes which can be plugged? Child support and alimony where collection has been assigned to the state is dischargable (as to past debts). Which is to say, the worst deadbeat dads, the ones where the state has had to step in to enforce payments, have a significant advantage over other owers of child support. The proposed bankruptcy law changes this.
Certainly less insignificant now that more debtors are going to be forced into Chapter 13 (where their payments will be divided among lawyers, trustees, other creditors). As opposed to the situation before, where debtors could clear the decks with a Chapter 7 bankruptcy and then focus on their children. This bill taken as a whole is much more of a detriment to single mothers than a boon.
And yes, this is mere window dressing for a bill primarily intended to enrich the credit card banks, which have been the bill’s primary movers and supporters. Please don’t tell me you think the provisions concerning child support were added for any other reason than to give political cover to the supporters of MBNA’s bill. Now Senator Hogwash can say, “We’re doing it for the children!!” A glittery distraction from what’s really going on.
Please don’t tell me you think MBNA has been handing out campaign donations like Halloween candy out of concern for single moms.
And you think that’s a good thing? Now the state is competing with Mom and the kids for Dad’s future resources.
I have complete confidence that credit card companies made donations in hopes of getting a law which was favorable to credit card companies. And they largely succeeded. But their victory was not complete and the bill is more balanced than opponents make it out to be. Additionally, I believe the reforms which they succeeded in getting which aided their industry are mostly appropriate and that some of the debtor safeguards added to the law are good ones which work directly against the interests of the credit card companies.
My understanding is that the state doesn’t pay mom until dad pays them, so that this became a back-door way to extinguish some child support debts. That said, I know a lot about bankruptcy and bubkes about child support so I’d welcome informed correction or comment on that subject.
What those water-into-gasoline investors need is a good lobbyist willing to throw some money around in Congress. I’m sure they could scrounge up a nice research subsidy to cover their investment and ensure them a tidy profit.