Child Tax Credit and Bankruptcy

Is the Child Tax Credit Protected in Bankruptcy?

Question: Can you file for bankruptcy and protect the child tax credit money you are receiving?

Answer: Yes.

Since the Covid pandemic began, Congress has passed three relief packages for the public:

  1. The Coronavirus Aid, Relief and Economic Security Act (CARES Act)
  2. The Consolidated Appropriations Act (CAA)
  3. The American Rescue Plan Act (ARPA)

Each package has offered financial aid for individuals.  That relief has been known as “stimulus” payments. The most recent legislation that was passed in March of 2021, The ARPA, also offers a monthly child tax credit.  The child tax credit is available to families with children who will be under age 18 by the end of the year 2021. Starting July 15, 2021, families began receiving this monthly tax credit.

Some people may wonder how and if that tax credit will impact a bankruptcy filing.

The tax credit, as well as any stimulus funds received or yet to be received under the three packages, are protected in bankruptcy. They are not considered income for purposes of the means test calculation in Chapter 7 or Chapter 13 bankruptcy, or determining a Chapter 13 payment plan. Furthermore, these funds are not subject to administration in a bankruptcy estate. In other words, there is a bankruptcy protection, called an exemption, that protects the stimulus and tax credit money from being taken in bankruptcy to pay creditors.

If you are considering a bankruptcy filing as your debt relief option, then you should consult with a bankruptcy lawyer.

Jessica Nomie Law is an Oregon bankruptcy lawyer serving people throughout the state of Oregon, primarily in Clackamas and Portland areas.  Jessica specializes in Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.  Her firm offers virtual representation options and free initial consultations.

Leave a Reply

Your email address will not be published. Required fields are marked *