How Support Obligations Are Handled In Bankruptcy

Divorce and Bankruptcy

When a divorced debtor files bankruptcy they are often facing a special set of circumstances that may impact how their bankruptcy proceeds.  One of those special circumstances is the obligation to pay domestic support to a former spouse or child. For the purposes of bankruptcy, domestic support obligation is defined as money that must be paid to 1) a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible relative; or 2) a governmental unit like a state collection bureau.

Below are some real life examples of what a support obligation looks like.

  • A debtor filed for divorce 1 year before filing bankruptcy.  The divorce decree orders the debtor to pay his spouse $1,000 per month in alimony.  This is a domestic support obligation.
  • A debtor is sued by the state and ordered by the court to pay back child support.  This is also a domestic support obligation.
  • A debtor signs a contract with the grandparent of his/her child that says he/she will pay $500 a month if they care for the child.  This is also a support obligation.

Support obligations cannot be discharged in bankruptcy.  Under the bankruptcy code, support obligations are given priority even over taxes. But in order for a debt to be defined as a support obligation during bankruptcy it must arise from a legal agreement, a divorce decree or court order or some determination by a governmental unit.

The fact that support obligations cannot be discharged in bankruptcy is not necessarily a bad thing.   Bankruptcy debtors with support obligations may be able to use their existing assets to pay their support obligations while discharging their other unsecured debts.

By | 2017-12-13T04:14:09+00:00 March 23rd, 2010|Bankruptcy, Divorce and Bankruptcy, Economy|Comments Off on How Support Obligations Are Handled In Bankruptcy