BAPCPA, the new bankruptcy law which went into effect in October 2005, changed many things in the bankruptcy code. One of those things was the treatment of “a domestic support obligation.” That form of debt includes money owed to a spouse, former spouse, child, etc. for child support, to a spouse or former spouse for alimony, or a money obligation incurred in the course of a divorce or separation agreement.
Before BAPCPA, the law specified that you could not discharge child support obligations or alimony in a Chapter 7; you could, however, discharge an obligation owed to a spouse or former spouse under a divorce or separation agreement provided that the obligation was not in the nature of child support or alimony. This type of obligation is often called an equalizing payment, and is paid to the spouse or former spouse to equalize the division of property.
Under the old law, if the debtor didn’t have the ability to pay or if discharging the debt would result in a benefit to the debtor that outweighed the detriment to the spouse or former spouse, it could be listed and discharged. Under the new law, that can’t happen: in a Chapter 7 bankruptcy, the debt is treated as non-dischargeable, and when the bankruptcy is over, the debtor will still owe the money to his or her spouse or former spouse.
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Last modified: May 31, 2007