Bankruptcy

New Jersey Judiciary Probation Child Support Enforcement

Revised 6-2019

In this Topic

  1. A. Authority
  2. B. Overview
  3. C. Initial Actions Taken For Any Type of Bankruptcy
  4. D. Managing Bankruptcy Filings
  5. E. Discharge/Dismissal Procedures
  6. F. Payments Received Under a Bankruptcy Plan
  7. Bankruptcy Procedures Overview - Sections
  8. NJCSI Handout Materials
  9. Related Information

Procedures Overview - Section 1900

A. Authority

United States Code:

11 U.S.C. §523(a)(5),
11 U.S.C. §362(a),
11 U.S.C. §362(b)(2)
11 U.S.C. §362(b)(7)
11 U.S.C. §362(c)
11 U.S.C. §362(d)
11 U.S.C. §507(a)
11 U.S.C. §522(d)
11 U.S.C. §541(a)
11 U.S.C. §547(c)
11 U.S.C. §1306(a)
11 U.S.C. §1327(b)

Other Authorities:

 

OCSE Action Transmittal – AT 06-05

DFD Action Transmittal – AT 16-05

New Jersey Statutes Annotated:  

 

N.J.S.A. 2A:17-56.13, 2A:17-56.41, 2A:17-56.54, 2A:17-56.59

B. Overview

An individual debtor voluntarily files a petition for bankruptcy with the United States Bankruptcy Court.  The two most common bankruptcy types utilized by individual debtors are:

  • Chapter 7— Liquidation; and
  • Chapter 13—An adjustment of debts of an individual with regular income

In rare cases, an individual debtor may file a petition under Chapter 11.  Farmers file petitions under Chapter 12.

In all voluntarily bankruptcy cases, the debtor/obligor/Non-Custodial Parent (NCP), in addition to the petition, files schedules which include statements of assets, secured and unsecured debts, income and expenses.  In a Chapter 13 case, a debtor files a Chapter 13 plan of repayment of debts.  In Chapter 7 and Chapter 13 proceedings, trustees are appointed to oversee cases.

In Chapter 7 proceedings, the trustee reviews the debtor's statement of assets, debts and exemptions.  The trustee's responsibility is to (a) determine the nature of property of the debtor's estate, 11 U.S.C. §541(a), (b) determine the allowable exemptions that is property the debtor may retain at the conclusion of the bankruptcy case, 11 U.S.C. §522 and (c) calculate whether assets exist in excess of the allowed exemptions which could be liquidated to satisfy administrative claims and the claims of the unsecured creditors of the debtor's estate.  The stated objective of Chapter 7 proceedings is to give the debtor a fresh start, eliminating the debt obligations, allowing the debtor to retain certain property to resume a debt-free existence.  Successful Chapter 7 debtors are granted a discharge of all unsecured debt so that repayment of that debt is not required by operation of law.  Certain obligations are not subject to the discharge, including but not limited to unpaid alimony and child/spousal support, 11 U.S.C. §523(a)(5).

In Chapter 13 proceedings, the trustee's role is to review a proposed plan filed by the debtor along with the petition schedules.  The trustee also determines whether the debtor retaining control of all assets, presents a feasible repayment plan using non-exempt assets and/or earnings to satisfy (completely or partially) the obligations of creditors.  The plan may liquidate assets to pay claims, but typically debtors provide monthly payments to the trustee to satisfy claims.  Periods of payments usually last from 36 months up to 60 months.  If the plan is confirmed, a discharge is issued to the debtor at the conclusion of a successfully completed plan.  Alimony and child/spousal support arrears are also not dischargeable under the provisions of Chapter 13.

Upon the filing of the bankruptcy petition, an automatic stay by operation of 11 U.S.C. §362(a) prevents continuation or commencement of some judicial, administrative, or other actions or proceedings against the debtor for collection of a debt or enforcement of payment on a judgment, from any assets of a debtor's estate.  Examples of prohibited actions or proceedings may include Financial Institution Data match (FIDM), Child Support Lien Network (CSLN), issuance of Probation Child Support Enforcement (PCSE) bench warrants, Enforcement of Litigant's Rights (ELR) hearings, collection of arrears, recording of Automated Case Management System (ACMS)/Civil Judgment and Order Docket (CJOD) judgments, seizure of assets and Project Save Our Children (PSOC) referrals.  The Bankruptcy Court may issue an order partially vacating the automatic stay in order for any of these automatically stayed actions or processes to become permissible.

Note: 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.

However, there are a number of actions and proceedings not affected by the automatic stay:

  1. Establishment of paternity, establishment of a support order, modification of a support order, and adjustment of a support order, such as a cost-of-living adjustment (COLA) are not affected by the automatic stay provision.  Hearings for these purposes are permitted, as are warrants to compel appearance at such hearings, however; these warrants are not requested by Probation and will not be on NJKiDS.
  2. Income-withholding for current ordered support may continue as well as collection of support from property that is not property of the debtor's estate or from assets which were abandoned by the trustee.  Income withholding for ordered arrears repayment may continue from post-petition earnings.
  3. For Chapter 7 bankruptcy proceedings only, income-withholding/collection of arrears may continue.  A Chapter 13 allows certain actions to be taken at any time while a bankruptcy is pending without seeking relief from the automatic stay, including income withholding to collect current support due.  Income withholding to collect arrears is permissible after the automatic stay is in place, but only until confirmation of the Chapter 13 Plan.
  4. Federal and state tax offsets for all tax years may continue.  Also driver's license suspensions, professional license suspensions, credit bureau reporting and passport denials may continue.  Payments required by the New Jersey Child Support Lien Law may be received and distributed.
  5. Medical obligation enforcement is permitted.  Hearings and warrants needed to enforce medical support obligations are also permitted.

Please note that for a Chapter 13 bankruptcy, the plan may specify the terms for repayments of arrears.  PCSE staff should review the plan and update NJKiDS accordingly.

In a Chapter 7 proceeding, assets of the debtor's estate include all assets not subject to exemption but do not include future income of the debtor, assets exempted by the debtor or assets abandoned by the trustee.

In a Chapter 13 proceeding, future income as well as all non-exempt assets are assets of the debtor's estate.

In a Chapter 7 or Chapter 13 bankruptcy, the trustee must confirm whether the obligor has an order for support and whether the obligor is current at the commencement of the case.  The trustee is required to provide notices to the holder of the support claim, obligee/Custodial Parent (CP), and the state child support agency to keep them abreast of the bankruptcy proceedings.  Also, before confirmation of a Chapter 13 plan or closing a Chapter 7 case, the trustee must obtain information from the obligor that the obligor is current on the support order and then must notify the obligee or a representative (which could be child support enforcement) in writing of the obligor's last reported address and employment and the employer's address.  After the bankruptcy discharge, the trustee is also required to provide the state child support agency and obligee with information about the discharge, the obligor's last known address, the last known name and address of the obligor's employer, and the name of any creditor who holds a non-dischargeable claim or a claim that has been reaffirmed.

C. Initial Actions Taken For Any Type of Bankruptcy

  1. The initial filing should be sent to the Division of Family Development (DFD) but may be received by PCSE first.  Upon receipt of a bankruptcy petition or Order for Meeting of Creditors by PCSE, staff must review it to determine the type of bankruptcy petition the debtor has filed (Chapter 7, 11, 12 or 13) and confirm that the bankruptcy is still active before updating DEMO appropriately.  This information can be found by contacting the Bankruptcy Court, trustee, attorney for the debtor of the Bankruptcy Court's Voice Case Information System (VCIS) at 866-222-8029 (New Jersey's code is 88) or on the Bankruptcy website at www.njb.uscourts.gov.  The bankruptcy filing notice must be forwarded to DFD utilizing the currently approved methodology.   Should the Administrative Office of the Courts (AOC) staff receive a bankruptcy petition, staff must confirm that the filing is still active.  If so, the information will be forwarded to DFD with a copy to the Vicinage Assistant Chief Probation Officer (VACPO) utilizing the currently approved methodology.
  2. PCSE staff must document any contact and all actions taken regarding the bankruptcy on the NOTE screen.
    1. PCSE staff may not communicate directly with the debtor regarding collection on the case, while the automatic stay is in effect.  All inquires 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.
  3. To determine if child/spousal support is included in the bankruptcy plan, PCSE staff may request a copy of the plan if one was not received utilizing the Request for Bankruptcy Plan letter (Attachment 1900A).  PCSE staff may need to update NJKiDS based on the bankruptcy information in the plan.
    1. If PCSE staff determine that the child/spousal support is not part of the plan and will not become part of the plan, the bankruptcy data should not be added to DEMO.  A note should be entered detailing the information received to indicate that child/spousal support is not included in the bankruptcy plan.
  4. There are three United States Bankruptcy Courts located in New Jersey.

 

CAMDEN

NEWARK

TRENTON

Street Address
US Bankruptcy Court
District of New Jersey
401 Market Street
Camden, NJ 08101

Mailing Address
US Bankruptcy Court
P.O. Box 2067
Camden, NJ 08101

Phone:
(856) 361-2300 (Chapter 7 cases)
(856) 757-5485 (Chapter 13 cases)

Street Address
US Bankruptcy Court
District of New Jersey
Martin Luther King Jr.
Federal Bldg.
50 Walnut Street
Newark, NJ 07102

Mailing Address
US Bankruptcy Court
District of New Jersey
P.O. Box 1352
Newark, NJ 07102

Phone:
(973) 645-4764 (Chapter 7 & 13 cases)

Street Address
Clarkson S. Fisher US Courthouse
402 East State Street
Trenton, NJ 08608

Phone:
(609) 858-9333 (Chapter 7 cases)
(609) 989-220 (Chapter 13 cases)

Note: Child support creditors or their representatives are allowed to intervene in bankruptcy proceedings without charge and without meeting any special local court rule or requirement for attorney appearances.  One example of this is the obligee/CP filing with the Bankruptcy Court for relief from the automatic stay of enforcement.

D. Managing Bankruptcy Filings

PCSE staff must monitor the case for the duration of the bankruptcy.  This should include monitoring payments and checking the current status of the bankruptcy.  In the event that payments cease, efforts must be made to contact the trustee, attorney for the debtor or the Bankruptcy Court either by phone or using the Notification of Debtor Non-Compliance Letter to Trustee (Attachment 1900B).  The response from the trustee should be reviewed with your supervisor for the appropriate next steps.

PCSE staff can utilize reports generated from the Bi-Portal to track and manage bankruptcy cases.

E. Discharge/Dismissal Procedures

  1. If a bankruptcy discharge or dismissal is received by PCSE staff directly from the debtor, trustee, or the Bankruptcy Courts, PCSE staff must review the case and update DEMO appropriately.  PCSE staff must also notify DFD using the currently approved methodology.
  2. When a discharge or dismissal date is entered on DEMO:
    1. NJKiDS will end date any prior excluded enforcement remedies.  Please keep in mind that other court ordered conditions for exemption may still apply.  If an exemption was entered manually, NJKiDS will not automatically end-date.
    2. For Chapters 11, 12, and 13, NJKiDS will automatically generate an Income Withholding Notice (CS006) with the case's current arrears payback.  This is not necessary for Chapter 7 bankruptcy proceedings, because collection of arrears is allowable.

F. Payments Received Under a Bankruptcy Plan

All payments issued from the trustee as part of the bankruptcy are required to be sent directly to the New Jersey Family Support Payment Center (NJFSPC) for proper processing.  Similarly, any payments issued by the obligor/NCP to the obligee/CP, outside of the bankruptcy proceeding, should also be sent to the NJFSPC for processing.  Should PCSE staff become aware that payments are being sent directly to the obligee/CP, then staff should contact the trustee regarding payments made by the plan, or the debtor's attorney for payments made outside of the plan, to have all future payments sent to the NJFSPC.  Payments sent directly to the obligee/CP can be applied to the case as a direct pay credit for those limited instances.

Further, PCSE should contact the obligee/CP under either of these scenarios, and alert them that all payments received directly should be sent to the NJFSPC, so that they can be properly posted to their case in accordance with state policy.

Bankruptcy Procedures Overview - Sections

For sections on Bankruptcy Procedures, click the links below:

To view the following attachments, click the links below:

NJCSI Handout Materials

For NJKiDS instructions on Bankruptcy, click the link below:

  • For more information and guidance, please refer to AT-16-05: SOP: Bankruptcy (supersedes AT 15-20). This transmittal is to make staff aware that effective March 21, 2016, updates were made to the New Jersey Kids Deserve Support (NJKiDS) system that affect how bankruptcy filings are processed.
  • 11 U.S.C. § 362(a)

 

Institute for Families, School of Social Work  Rutgers, the State University of New Jersey - Child Support Program Manual 2020 Release