What should an employer do if an employee who is subject to a child support order files a petition for relief under the Bankruptcy Code?
Answer in detail:
The answer to this question depends in part upon the distinction between prepetition earnings of the employee, i.e., income earned before the employee files a petition for relief, and postpetition earnings, i.e., income earned after the petition has been filed. An employer may not use prepetition earnings to satisfy a child support withholding order.
Postpetition earnings are treated differently. In a proceeding under Chapter7, the employee's postpetition earnings may be used to satisfy a child support order without court approval. However, in proceedings under Chapter13, the employer should obtain authorization from the bankruptcy court before using postpetition earnings to satisfy a child support order. Typically, the party responsible for the child's welfare will seek a court order to continue the withholding. However, the employer should obtain a copy of the court's order granting such relief before continuing to withhold for child support.
STATE OF INDIANA - DEPARTMENT OF CHILD SERVICES