Most people don’t think about growing their families when filing New York bankruptcy, but bringing a child into your family can add a few wrinkles to a filing that debtors might want to know about, particularly when a pregnancy happens by accident.
Probably the most common place where a new child will (or won’t) affect a chapter 7 bankruptcy is in chapter 7, which is means tested. Debtors might want to include an unborn or soon-to-be-adopted child in a filing to keep their incomes below the state’s median. An additional person in a family can add more than $10,000 to the median income threshold in New York, so it’s understandable that debtors at certain income levels would want to try this. Unfortunately, the size of the debtor’s family is determined at filing. Debtors who are expecting children are better off waiting until the child is born or adopted before filing bankruptcy, if at all possible.
Speaking of which, for adopted or foster children the child only counts as a family member once the adoption is finalized. Although, the Bankruptcy Code doesn’t define “family” outside of “family farmers” and the like, which are relevant to the rare chapter 12 bankruptcy. The law does refer to the Census Bureau when discussing median incomes. There, a family household only includes a householder and any of that person’s relatives. It does not include non-relatives who are a part of the household. This means that non-related, non-adopted children are not included in chapter 7, even if the child is treated as a family member.
Debtors whose incomes are above the state’s median and must take the means test can plead that the new child is a special circumstance (covered here) that warrants keeping the case out of chapter 13. This would likely involve showing that the new child requires the debtor to spend more than would otherwise be the case at that income level.
In chapter 13, debtors are allowed to include child care expenses in their proposed repayment plans. If a debtor is expecting a child, there are multiple ways to accommodate him or her in the plan. Usually trustees will understand, but debtors can try to delay the bankruptcy filing or the confirmation of the plan until the child is born. Debtors whose plans are in progress can simply move the bankruptcy court to modify the repayment plan once the child is born.
Finding out that you will have a child will add stress to a bankruptcy. That’s why it’s so important to discuss your situation with an experienced New York bankruptcy lawyer to prevent yourself from being overwhelmed.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Bankruptcy Lawyer Brooklyn Bruce Weiner for a free initial consultation.
