Can Alimony and Child Support Be Discharged In Bankruptcy?

If you’re considering filing for bankruptcy to discharge past due alimony, child support or other domestic support obligations you need to rethink your strategy. Bankruptcy will not free you of your obligation to provide support for an ex-spouse or your children if ordered by a court, governmental agency or divorce/separation agreement. However, bankruptcy may benefit you in other ways and make it easier to fulfill your support obligation if you are having trouble paying your bills and debts.

As a Maryland bankruptcy attorney, I frequently encounter people who hope to discharge their alimony/spousal support/maintenance and child support debts through bankruptcy. Most are behind on their payments and just want to get free of the past-due support they owe. Others just want to avoid paying child support or alimony. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 dealt very distinctly with this issue and prohibits bankruptcy discharge of any domestic support obligations, whether they are for children or ex-spouses.

What are Domestic Support Obligations?

A domestic support obligation (also known as a DSO) is any sort of alimony, maintenance or support you are required to provide for an ex-spouse or child arising out of divorce, separation, custody disputes, or other domestic relations action in a court of law. To qualify as a domestic support obligation, the support must be part of a court order, divorce decree, separation agreement, property settlement agreement or administrative determination, and it must be intended as a form of support. However, it does not necessarily have to be payments made directly to the ex-spouse or child. For example, if you’re ordered to pay educational expenses or pay for medical insurance coverage, those are usually considered domestic support obligations and won’t qualify for bankruptcy discharge even though the money doesn’t go to the ex-spouse or child. If the bankruptcy debtor’s ex-spouse is to receive a portion of the debtor’s pension benefits, that also is a debt that cannot be discharged in bankruptcy.

Please note: For the remainder of this article, any reference to alimony, maintenance, spousal support or child support is also intended to imply all other forms of domestic support obligations as well.

Chapter 7 Bankruptcy Discharges and Domestic Support Obligations

In a Chapter 7 bankruptcy, a debtor’s assets are liquidated (sold off) to pay off creditors, starting with secured debts like a mortgage and then unsecured debts like credit cards. Once all the assets are gone, the remaining unsecured debts are discharged — wiped out. While many debtors would like to eliminate their alimony or child support debts through a Chapter 7 bankruptcy discharge, this simply is not allowed. Although other non-domestic debts will be paid off or discharged, any domestic support obligations you have will remain.

However, any past-due child support or spousal support must be paid off before any other unsecured debts. So a Chapter 7 bankruptcy may benefit you in two ways. First, your assets will be used to pay off past-due domestic support obligations first so that a larger portion of unsecured debts will be discharged, resulting in greater decrease in overall debt. Secondly, you’ll be free of other debt obligations so your support obligations will be easier to keep up with.

Chapter 13 Bankruptcies and Domestic Support Obligations

Chapter 13 bankruptcy is a form of debt restructuring that allows a debtor to get control of their financial situation without incurring additional debt in the meantime. A repayment plan is put in place to pay off debts over 3 to 5 years, after which any remaining unsecured debts are usually discharged. This includes domestic relations debts that are not in the nature of domestic support obligations. Anything other than a DSO is discharged. While domestic support obligations, including past-due support, cannot be discharged at the end of a Chapter 13 repayment plan, past-due support must be included in the repayment plan and has higher priority over other unsecured debt (including tax debts) so that it will get paid off first. So a Chapter 13 bankruptcy can make it easier to get caught up on past-due child support, alimony or other support obligations and discharge other unsecured debts (after completion of the repayment plan) so that continuing support payments are easier to make. It’s important to note that in order for unsecured debts to be discharged, all domestic support obligations must be current upon completion of the repayment plan. If you have past-due support obligations at the end of the repayment plan, the bankruptcy trustee will not discharge your other remaining debts.

Chapter 11 Bankruptcies and Domestic Support Obligations

Chapter 11 bankruptcy is a complex debt restructuring tool typically reserved for businesses and high-net-worth individuals. Like Chapter 13, the debtor creates a repayment plan to be approved by the bankruptcy court and, after completion of the plan, most assets are liquidated and remaining unsecured debts are discharged. Chapter 11 is more flexible and provides more options than Chapter 13, but has more responsibilities, takes longer and is more complex. Despite the increased flexibility, even a Chapter 11 bankruptcy does not permit domestic support obligations to be discharged. However, as with Chapter 13, past-due support can be included in a Chapter 11 repayment plan, therefore offering similar advantages as a Chapter 13 bankruptcy.

Questions regarding domestic support obligations and filing for bankruptcy in Maryland?

If you’re planning to file for bankruptcy in Maryland and are required to pay alimony, child support, or other domestic support obligations, it’s important that you know how your bankruptcy will affect those obligations and your other debts. Maryland bankruptcy attorney John Burns can answer all your questions about bankruptcy and support obligations and help you create a bankruptcy plan that is most advantageous to your situation. Call our office at 301-441-8780 to schedule an appointment.