Is Alimony Dischargeable in Bankruptcy?

Is Alimony Dischargeable in Bankruptcy?

When two people get divorced, the court must divide everything. In South Carolina, divorce court judges must determine a number of issues, from how to divide personal property and visitation schedules to child support and alimony (“maintenance”). Each of these issues is dealt with in a final court order. That order creates a financial obligation for the parties. If a person is ordered to pay money to their spouse, that creates a debtor-creditor relationship until the financial obligation in the court order is satisfied. The question then becomes: is alimony dischargeable in bankruptcy?

The Type of Bankruptcy Matters

When someone files a petition for bankruptcy, they are referred to as a “debtor.”  They must first choose the appropriate type of bankruptcy. In general, most people will either file for Chapter 7 or Chapter 13 protections. Chapter 7 is the “clean slate” that most people think about when discussing bankruptcy. It wipes out all debts, except those that are reaffirmed or non-dischargeable under federal law.

For those who do not qualify for Chapter 7 bankruptcy due to earnings or assets, a Chapter 13 is more appropriate. Under Chapter 13, the bankruptcy court allows the debtor to create a “Plan” to pay back all the creditors, often over a 3- to 5-year period, with no interest, and often at deep reductions in total amounts.  The type of bankruptcy chosen can make all the difference in what types of debts can be discharged.

Domestic Support Obligations Are Never Dischargeable

Under 11 U.S. C. 523(a)(5), the Bankruptcy Code specifically states that “Domestic Support Obligations” (DSO) are not dischargeable. These are things like child support and alimony. So, it really doesn’t matter whether a person seeks protection under Chapter 7 or 13. You will not be allowed to wipe out those obligations.

Other Post-Marital Obligations – Not Dischargeable In Chapter 7 Bankruptcy

A little over 10 years ago, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), which expressly exempts other ordered obligations as non-dischargeable.  Here are just a few examples of things that can be considered non-dischargeable under the law:

  • Money owed to a spouse
  • Money owed to an ex-spouse
  • Money owed to children, parents, or other close relatives
  • Alimony or maintenance
  • Anything ordered by a court for the purpose of supporting or providing for a relative, regardless of whether it is being collected by a government agency or private collector
  • Debts incurred as a result of a separation agreement or divorce court order

So, to clarify, pretty much any debt owed to a close relative can become non-dischargeable in bankruptcy when the debt is incurred due to a divorce decree or other family court action.  But there is a catch: this particular exception only applies to Chapter 7 bankruptcies.

Other Post-Marital Obligations – Dischargeable In Chapter 13 Bankruptcy

If a former spouse files for Chapter 13 bankruptcy, you must immediately file your proof of claim in the bankruptcy court to preserve your rights to claim against the debtor’s estate. Otherwise, you risk losing your right to collect certain obligations. Although Domestic Support Obligations like alimony cannot be extinguished through any type of bankruptcy, other obligations, such as property distributions, can be discharged in a Chapter 13 proceeding.

Get Help Today

If you suspect your ex-spouse is going to attempt to avoid paying required obligations, you need to contact an experienced attorney who can advise you on your options for protecting your right to collect your court-ordered property distribution and domestic support. Sometimes this will mean having an attorney handle your bankruptcy and another attorney handle your divorce action.

If you are facing a divorce and suspect your spouse may be considering bankruptcy, contact Klok Law Firm LLC to discuss your case and learn more about your rights.

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