September 11, 2018 0

Bankruptcy and Child Support – Everything You Should Know

Posted by:Charles Bosse onSeptember 11, 2018

Filing for bankruptcy definitely isn’t the end of the world, but it does have considerable implications that will impact your finances in the coming years. I’ve discovered that in most cases, focusing efforts on creating a bright future is the best way for people to tackle their bankruptcy and consecutive recovery. To do this, however, folks have to be aware of precisely what bankruptcy entails so they can accurately budget, plan, and rebuild their wealth in the most efficient way possible.

One of the most common questions I get asked pertains to how bankruptcy will have a bearing on child support payments. While this topic may appear to be pretty straightforward, I’ve found that it causes a lot of misunderstanding so today we’re going to take a closer look and try to resolve some of that confusion.


Does bankruptcy cover child support debts?

Even though bankruptcy releases you from a wide variety of debts, child support is not one of them. If you owe a significant amount of money in child support when you declare bankruptcy, it will not be released in bankruptcy so it’s best to speak to the Department of Human Services (DHS) and negotiate a repayment plan. If, for whatever reason, you believe the assessment delivered by the DHS is inaccurate, you can dispute this.


How is child support gauged?

The DHS is responsible for regulating and dealing with separated parents on child support assessments. To determine how much child support you must pay, the DHS consider both your income and your care percentage of the children involved. By using your previous tax return as a benchmark, the DHS will use these figures to calculate your anticipated income for the coming year. This emphasises the value of keeping your tax returns up to date, and any adjustments to your circumstances should be disclosed to the DHS as quickly as possible.


Income contributions to your bankrupt estate

An income threshold is utilised to verify if a bankrupt person can afford to contribute some of their income to pay off the debts in their bankrupt estate. Despite this, matters like income tax, the number of dependents, fringe benefits, salary sacrificing, and child support will alter your income threshold. The following table displays the specific threshold limits as of September 2017:

Declaring Bankruptcy,Bankruptcy Advice,Bankruptcy Adelaide


The DHS define a dependent as anyone who lives with you most of the time and earns below $3,539 every year.

Assuming you earn over the income threshold, your trustee would figure out your income contributions to your bankruptcy estate with the following formula:

(assessable income – income threshold amount) ÷ 2


As a result, every 50 cents you earn over your income threshold will be used to repay the debts in your bankrupt estate.

For instance, if you earn $110,000 every year before tax, you’ll likely be paying close to $30,500 every year in tax. Your assessable income would therefore be roughly $79,500. Assuming you have no other income and no dependents live with you at home, your trustee would determine your bankruptcy payments as follows:.

($79,500 – $55,837.60) ÷ 2 = $11,831.20 (or roughly $986 per month).


Child support contributions.

Your child support contributions are deducted from your taxable income so the more child support you pay, the less money gets contributed to your bankruptcy estate. Using the above example, if you are required to pay $15,000 in child support payments annually, your assessable income would be decreased from $79,500 (income after tax) to $64,500.


After delivering your trustee with a copy of your child support assessment from the DHS, your trustee would calculate your bankruptcy payments as follows:

($64,500 – $55,837.60) ÷ 2 = $4,331.20 (or about $361 per month).



Whilst blending family law and bankruptcy can be slightly complex, there’s always someone to assist you at Fresh Start Solutions Adelaide. If you have any more questions relating to bankruptcy and child support payments, or you just need some friendly advice, contact our team on 1300 818 575, or alternatively visit our website for additional information:


Leave a Reply

Your email address will not be published. Required fields are marked *

Copyrights © Fresh Start Solution.