“Big Pharm” may have bested the pandemic (domestically), but as continuing benefit under the American Rescue Plan, expanded child tax credits ($3,600 per child under six, paid in $300 monthly installments and $3,000 per older child paid out $250 monthly) commence soon. However, in a consumer bankruptcy filing, any additional income affects chapter 7 eligibility; added funds also contribute to one’s payment dues in chapter 13. A distribution owed to the debtor is likewise an asset subject to limited exemption from turnover for repayment of liabilities.
Yet, due to its linking to COVID, bankruptcy debtors are given some assurance the credits won’t be factored into eligibility or be made available for distribution to creditors. Last year, benefits tied to COVID-19 relief were made exempt from garnishment by virtue of executive state order. In addition, the Attorney General has specifically instructed creditors not to touch the impending child tax credits.
In practice, however, it’s plausible that creditors could inadvertently seize child tax credits commingled with other, nonexempt deposits. Absent bankruptcy protection that comprehensively stays enforcement of judgment, the debtor is more vulnerable to loss of property and must rely upon the conscientiousness of a collection agency.
Enhanced benefits are generally good news for the individual family. However, with resulting inflation effecting increased living costs, they may not suffice to cure a state of insolvency. If you can’t afford to repay your debts absent undue hardship and sacrifice, it’s time to consider chapter 7 or 13 bankruptcy as legitimate, proactive means to cancel or reorganize debts.
With the economy reopening, financial hope’s restored, but the damage may be done. If you’re struggling with your bills, you don’t have to suffer.
We’ve helped hundreds of San Diegans recover from debt. Within the framework and ethical requirements of federal and state bankruptcy laws, we will make the utmost effort to assist you and your family. Contact us for a free, confidential consultation.
Photo credits: Fusion Medical Animation, CDC