The basic premise of Chapter 7 is that the debtor trades all non-exempt property and a full disclosure of financial affairs for a discharge of personal liability on their debt. Not all personal liability is discharged; a child support obligation is a non-dischargeable debt. The debtor must file a Bankruptcy Petition, Schedules, and a Statement of Financial Affairs with the bankruptcy court. In most cases, the discharge is entered and the Chapter 7 case is completed in about 120 days.
Chapter 7 bankruptcy is sometimes called “liquidation” bankruptcy. Businesses going through this type of bankruptcy are past the stage of reorganization and must sell off assets to pay their creditors. The process works much the same for individuals.
CSS may receive notice of a Bankruptcy in a variety of ways; Court Clerk, Bankruptcy Trustee, NCP, NCP attorney or CP. The Bankruptcy Court will notice CSS if a Proof of Claim is needed. In most instances, the Proof of Claim is filed electronically.
During the time the NCP is in bankruptcy the following processes remain in place:
- IWO for current support, spousal support, if applicable
- Federal and State tax offset collections
- Credit Bureau Referral
- Passport Denial
Useful screens:
- BKCT:
- The Bankruptcy Court screen displays a list of bankruptcy courts for a given state. The Bankruptcy Court information is used to update ASUP.
- SSN4:
- Allows for a client search using the last four digits of the social security number and the option of entering up to eight letters of the last name.
Required OSIS updates:
- Step 1:
- Update ASUP screen with Chapter 7 information and date filed
- Step 2:
- Document all actions on CSLOG
After Discharge or Dismissal received:
- Step 1:
- Update ASUP screen with discharge/dismissal date
- Step 2:
- Document all actions on CSLOG
For assistance with the Proof of Claim or, other bankruptcy related issues contact *OCSS.bankruptcy
Legal Authorities:
United States Code:
- 11 USC §§ 101‐1501 Bankruptcy Code
- 11 USC §362(b) – Automatic Stay (exceptions)
- 11 USC §501 – Filing Proofs of Claims or Interests
- 11 USC §507(a)(1)(A) – Priorities
- 11 USC §1327 – Effect of Confirmation
- 42 USC §654. State plan for child and spousal support
- 42 USC §656 Support Obligation as Obligation to State; Amount; Discharge in Bankruptcy
Code of Federal Regulations:
- 45 CFR §303.2 Establishment of cases and maintenance of case records.
- 45 CFR §303.3 Location of noncustodial parents in IV-D cases.
- 45 CFR §307.10 Functional requirements for computerized support enforcement systems in operation by October 1, 1997.