I saw this today and thought it was a really informative article and wanted to pas it on to any readers of the Maryland Bankruptcy Center blog:
In most discussions of bankruptcy, there are few mentions of the rising costs of motherhood/parenthood, especially considering the current economic state of affairs, whereby families are sometimes forced to choose between clothing, feeding and educating a child and their responsibilities of paying mortgages, car notes and consumer debt.
As a result, it’s as good a time as any during this especially tough economic era to take a closer look at how mothers, guardians, and caregivers are crunching the numbers when it comes to giving their child the very best, and what that means when, at the same time, that parent is forced to seek the protections of a personal bankruptcy. For example, what might spending for a school expenditures and activities and/or a college education mean when it comes time to file and face bankruptcy’s two basic evaluations?
The first is bankruptcy’s “means test,” an evaluation that determines a debtor’s eligibility for bankruptcy, and, in the case of Chapter 13 bankruptcy, a means for determining the amount of income available to repay debt obligations throughout the debtor’s case. The second is bankruptcy’s “good faith” requirement, a look at the debtor’s honest intention of using the bankruptcy process to get a fresh start from oppressive debts which were incurred either because of circumstances beyond their control, such as medical debts and the loss of employment, or because the debtor did not properly manage his or her finances.
In the case of a debtor-mother-parent seeking bankruptcy protection, one might assume that anything spent on children is beyond dispute under either evaluation. For instance, a single mom might presume that she is entitled to deduct from the means test her child’s college expenses over the life of her Chapter 13 repayment plan, thereby reducing her obligation to the unsecured creditors listed in her bankruptcy. In another case, a parent might believe that her expenditures on and expenses from her elementary school-aged child’s after school activities and enrichment were “above the line” deductions in calculating what she was obligated to pay unsecured creditors. Unfortunately, it is never a foregone conclusion that a personal bankruptcy subsidizes everything you want to provide for your children before considering those same obligations to your creditors.
In fact, the Bankruptcy Code’s means test formula for establishing how much debtors must recoup for and repay to their creditors allows less than a $150 a month per child for school expenses (notwithstanding other activities and/or sports) with the caveat that even this sum must be proven and justified. As a result, bankruptcy bound mothers, parents, and guardians must be aware of balancing the needs of the child with the demands of their creditors. While bankruptcy affords an unprecedented opportunity to wipe away many debts you can no longer afford, a debtor seeking its protections must constantly be mindful to weigh the costs of enriching their child’s life with the costs of creditor claims.
Despite the fact that bankruptcy courts will rarely damn a debtor for parent-child expenditures, often the intricacies of a personal bankruptcy mean it is essential to consult with an experienced bankruptcy attorney when facing these issues. Your bankruptcy attorney is important during the bankruptcy process to help you navigate any uncertain waters and work in your best interests during the entire duration of your case.
The bankruptcy lawyers at the Maryland Bankruptcy Center offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call (410) 766-4044 or (301) 587-8900 during the daytime, or during the off hours and we will be happy to dicuss your case.