Bankruptcy Procedures Chapter 11
New Jersey Judiciary Probation Child Support Enforcement
Revised 6-2019
Section 1902
A. Overview
Chapter 11 bankruptcy filings are frequently referred to as a reorganization bankruptcy. Chapter 11 reorganization is available to qualifying businesses and certain individuals. Additional information can be found under the Probation Child Support Enforcement Operations Manual, 1900 Bankruptcy Procedures Overview.
B. Allowable and Prohibited Actions under Chapter 11 Proceedings
1. Allowable actions or proceedings under Chapter 11 Bankruptcy:
- Withholding of income that is property of the bankruptcy estate for payment of domestic support obligations;
- Withholding of post-petition income for current and past-due court ordered support;
- Establishment of paternity;
- Establishment of support obligations;
- Modification of support obligations;
- Enforcement of medical obligations under Title IV, Part D of the Social Security Act;
- Suspension of drivers' and professional licenses;
- Reporting of overdue support to approved credit reporting agencies;
- Interception of federal and state tax refunds for all tax years;
- Denial of initial issuance or renewal of US Passport;
- Child custody or visitation;
- Dissolution of marriage, except the division of marital property;
- Domestic violence court proceedings; and
- Filing a Uniform Interstate Family Support Act (UIFSA) petition with a responding state agency. A note must be included on the petition that the obligor has filed for bankruptcy.
Note: For the purposes of Chapter 11 bankruptcy, it is permissible to have an income withholding for the purpose of collecting ongoing current support only.
Note: Project Save Our Children (PSOC) is also an allowable enforcement remedy under law, but New Jersey does not pursue this remedy once the debtor has commenced a bankruptcy case.
2. Prohibited actions or proceedings under Chapter 11 Bankruptcy:
- Financial Institution Data Match (FIDM);
- Child Support Lien Network (CSLN);
- Issuance of Probation Child Support Enforcement (PCSE) bench warrants;
- Seizure of assets (Writ of Execution);
- Enforcement of Litigant's Rights (ELR) hearings;
- Federal Offset Program (Federal Salary, Federal Retirement, Vendor Payment, Multi-State Financial Institution Data Match (MSFIDM), Insurance Match and Debt Check Program);
- Automated Case Management System (ACMS)/Civil Judgment and Order Docket (CJOD) - recording of judgments (any judgment recorded prior to the bankruptcy filing will remain in effect);
- Collection of arrears (NJKiDS will remove the arrears payback amount and generate an amended Income Withholding Order (CS006); and
- Exempt property that the Bankruptcy Code or state law permits a debtor to keep from creditors.
Note: Issuance of Probation Child Support Enforcement (PCSE) bench warrants - If a bench warrant is issued before a bankruptcy automatic stay, then PCSE staff must recall the warrant. If the warrant is not recalled, it shall not prevent an ability to comply hearing (CS702 hearing) from proceeding.
3. Once the Chapter 11 bankruptcy filing date has been entered on DEMO, NJKiDS will automatically exempt the enforcement remedies above in section 2 on the CPRO screen and generate a new Income Withholding Notice (CS006) with a $0 arrears payback amount.
An Action Note to File is sent to the primary case worker (staff with the RP035 role) and to the Administrative Enforcement Unit (AEU) worker when information is entered on DEMO. An Action Note to File is also sent to the County Welfare Agency (CWA) worker when arrears are owed to the state.
Note: NJKiDS will not automatically close active chains. Any in-progress enforcement chains must be closed manually by authorized workers. AEU workers must be notified to close an FIDM, CSLN and/or AREN chain in progress via Action Note.
4. The CS642 Proof of Claim form and cover letter (Attachment 1901A) is generated and sent to the obligee when the bankruptcy filing date is entered on DEMO.
5. When arrears are owed to CWA, an Action Note to File is sent to the CWA worker. The CWA worker can manually generate a proof of claim form for their attorney to file.
6. If the obligee contacts PCSE, staff should refer them to the Bankruptcy Court.
7. All efforts and contact regarding the bankruptcy must be updated on NOTE.
8. Only post-petition income or assets, not included in the debtor's estate (e.g. IRA or pension payments) or assets abandoned by the trustee, may be attached to enforce the arrears obligation. Post-petition earnings are not an asset of the debtor's estate under 11 U.S.C. §541(A) and, therefore, are available to pay past and future child support obligations.
9. In Chapter 11 filings, income or earnings that are attributed to personal services performed by a debtor, if they are acquired or earned after the Chapter 11 filing, are subject to income withholding and other enforcement actions to collect child/spousal support or alimony, because these earnings are not property of the debtor's estate.
If the obligor did not file a Chapter 11 bankruptcy, they may be affected by the filing through their employer. This may cause a temporary interruption of payments, medical coverage or Qualified Domestic Relations Order (QDRO) during the Chapter 11 process.
PCSE staff should contact the employer to confirm employment status and withholding of garnishment/provision of medical coverage. If debtor is still being paid, then the employer has an obligation to continue to forward child/spousal support payments. If payments are not being received, then an "Order to Show Cause" can be utilized to enforce the obligation.
10. PCSE staff may use the Notification of Debtor Non-Compliance Letter to Trustee (Attachment 1900B) to advise the trustee of the obligor's failure to comply with the support order. PCSE staff should also inquire as to the status of the filing every 90 days by calling the Bankruptcy Court's Voice Case Information System (VCIS) at 866-222-8029 and update the DEMO and NOTE screen with the details.
Note: Child support agency staff may not communicate directly with the debtor regarding collection on the case while the automatic stay is in effect. All inquiries regarding the status of the bankruptcy case or estate must be directed to the trustee or debtor's attorney. However, contact regarding other case matters is permissible.