What Happens to Child Support or Alimony Obligations in Bankruptcy?
For individuals contemplating bankruptcy, understanding the treatment of specific debts like child support and alimony is crucial. These obligations hold a unique position in bankruptcy law.
This article explores how child support and alimony obligations are affected when filing for bankruptcy, providing a clear perspective for those considering this financial step.
Understanding Bankruptcy and Family Obligations
Before diving into the specifics, it’s essential to understand the two primary forms of personal bankruptcy: Chapter 7 (liquidation bankruptcy) and Chapter 13 (reorganization bankruptcy).
The Special Status of Child Support and Alimony
Child support and alimony, known legally as domestic support obligations (DSOs), are treated with priority in bankruptcy proceedings. Unlike other types of debts, these obligations cannot be discharged or eliminated through bankruptcy.
Chapter 7 Bankruptcy and DSOs
- Non-Dischargeability: In Chapter 7 bankruptcy, while you can discharge many unsecured debts, child support and alimony obligations remain intact. They are not affected by the bankruptcy filing.
- Ongoing Obligations: You are required to continue making child support and alimony payments even after filing for Chapter 7 bankruptcy. The automatic stay does not halt these obligations.
Chapter 13 Bankruptcy and DSOs
- Priority Treatment: In Chapter 13 bankruptcy, DSOs are given priority status. This means they must be paid in full through your repayment plan.
- Payment Plans: The repayment plan under Chapter 13 must account for all current and back child support or alimony obligations, ensuring these debts are paid as a priority.
Impact on Divorce Settlements and Property Division
In addition to child support and alimony, divorce settlements and property division debts are also affected by bankruptcy.
- Non-Dischargeable Debts: Obligations from divorce settlements, like property division, are generally non-dischargeable in Chapter 7 bankruptcy.
- Exception in Chapter 13: However, in Chapter 13, some divorce-related debts, excluding child support and alimony, can be included in the repayment plan and potentially discharged upon its completion.
The Role of Automatic Stay in Bankruptcy
No Protection for DSOs
The automatic stay in bankruptcy, which halts most collection actions, does not apply to child support or alimony.
Collection actions for these obligations can continue despite a bankruptcy filing.
Dealing with Past Due Child Support and Alimony in Bankruptcy
Chapter 13 Offers a Solution
- Managing Arrears: Chapter 13 bankruptcy can help manage past due DSO payments. The repayment plan can include these arrears, allowing for a structured payback over time.
The Importance of Legal Counsel
Consulting with a qualified bankruptcy attorney is crucial. They can offer guidance on how your specific bankruptcy filing will impact your child support and alimony obligations.
Modification of Obligations
- Outside of Bankruptcy: It’s important to note that bankruptcy does not alter the amount of DSO owed. To modify these obligations, you must go through family court.
Strategies for Managing DSOs in Bankruptcy
- Staying Current: It’s essential to stay current with these payments during the bankruptcy process to avoid legal complications.
- Managing Arrears: For those behind on DSOs, filing for Chapter 13 bankruptcy might offer a more structured solution to manage these debts.
Bankruptcy does not relieve you from child support or alimony obligations. These debts maintain a special status and are prioritized in both Chapter 7 and Chapter 13 bankruptcies.
Understanding this will help you make more informed decisions if you’re considering bankruptcy.
Remember, bankruptcy can offer a fresh financial start, but it is crucial to approach it with a full understanding of its limitations, especially regarding family obligations.
Where Can I Find Help?
Dealing with bankruptcy doesn’t have to be a single-person job. The bankruptcy lawyers at Parker & DuFresne will help you determine the best course of action to help you get out from under your debt and move forward to a debt-free future.
Call today at 904-733-7766 for a free consultation, or click the button at the top of the page to schedule online.