Treatment of child support debts in a debt agreement
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All child support debts must be recorded in a debt agreement proposal.
The Child Support Registrar (Registrar) is not bound by any debt agreement which affects the collection of amounts payable for child support, child or spousal maintenance registered under the Child Support (Registration and Collection) Act 1988 (CSRC Act). The right of the Registrar to seek to recover amounts payable is provided in section 185K(2) of the Bankruptcy Act 1966. This puts the Registrar in a different position to other creditors. The Registrar may still collect child support, child or spousal maintenance from a debtor. The Registrar may do this by negotiating voluntary payment arrangements, by deductions from salary or wages, or by intercepting and applying taxation refunds.
The way child support debts are recorded in a debt agreement proposal depends on whether the debtor has overdue child support and what recovery action the Registrar has taken as at filing date of the debt agreement proposal:
- If a debtor is required to make ongoing payments but does not have overdue child support, the child support payments should be recorded as an expense under Child support and maintenance in section L of the explanatory statement.
- If a debtor has overdue child support and the Registrar has taken enforcement action by making deductions from the debtor’s salary or wages, the child support payments should be recorded under Payments to creditors not receiving a dividend by law in the debt agreement in section L, and the full amount of child support debt should be recorded in section E of the explanatory statement.
- If the debtor has overdue child support and the Registrar has not taken any enforcement action, the full amount of child support debt should be recorded in section D of the explanatory statement. It is recommended that the debtor contact the Registrar to query if any enforcement action will be taken if a debt agreement is made, as any future recovery action will affect the affordability of the proposal.
A liability for child support, child or spousal maintenance which is overdue continues following completion of a debtor’s obligations under a debt agreement. After completion of the debt agreement, the Registrar is entitled to collect the remaining child support debt (including any unpaid portion of child support debt that existed as at filing date of the debt agreement proposal).