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States Can File Objection To Bankruptcy Plan On Behalf Of Domestic Support Claimant

Posted By admin || 17-May-2010

State Can File Objection

In the Chapter 13 bankruptcy case of Trupp, Douglas; In re, the bankruptcy court partially sustained an objection to the confirmation of a debtor's Chapter 13 bankruptcy plan.

The details of the bankruptcy case:

In the debtor's Chapter 13 case, the Arizona Department of Economic Security filed a priority claim in the amount of $106,607 for a prepetition child support arrear­age. The claim listed the state as the creditor. Attachments to the claim indicated that $101,400 was owed to the debtor's former wife, who had custody of the couple's children. The balance was owed to the state and represented an assign­ment of child support for cash assistance paid to the former wife. The debtor's plan proposed to pay $3,600 to the state on its assigned claim. It did not provide any payment to the debtor's former wife. The state objected to confirmation. The court sustained the objection to the extent that it opposed the plan's treatment of the former wife's claim. Generally, child support claims must be paid in full through Chapter 13 plans. The exceptions are for situations in which the claimant accepts less than full payment and for claims assigned to governmental units. The court did not interpret the former spouse's failure to object to the plan as acceptance because the state's objection was lodged on her behalf as well as on behalf of the state.

It was not a wise strategy for the debtor to attempt to pay the former wife nothing on her claim while paying the state.  Debtors need to understand that bankruptcy courts will not allow them to not pay child support to a former spouse.  However, bankruptcy courts will allow a reduction in payment to governmental claimants.  As noted with the bankruptcy case, the court sustained only the part of the objection that related to nonpayment of the ex-spouse.

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