Why do “domestic support obligations” matter in bankruptcy?

21 Dec Why do “domestic support obligations” matter in bankruptcy?

Bankruptcy law has a way of making simple things seem complicated.

People file bankruptcy to get out of debt. But divorce and bankruptcy come together very frequently.

When people get divorced, they often are left with obligations to pay alimony, maintenance and child support. They also could be left with obligations to pay their former spouse’s bills. And they frequently are left with obligations to pay money to their former spouses for property settlements.

In almost all cases, you can’t get rid of debts arising from a divorce in your bankruptcy case. You may be able to stretch out or modify some payments in a chapter 13. But you’ll never get rid of domestic support obligations. So you need to know what a domestic support obligation is in bankruptcy.

A domestic support obligation must be owed to either your (a) a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible relative; or (b) a governmental unit like a state collection bureau. That means that if money is owed to your ex-spouse’s attorney, it won’t be a “domestic support obligation”.

A domestic support obligation must be for alimony, maintenance or support. It doesn’t matter whether it is specifically labeled this way or not. We look to the reality of the payment’s nature.

A domestic support obligation must arise from a legal agreement, a divorce decree or court order or some determination by a governmental unit.

Domestic support obligations are the top priority in any bankruptcy case. They come ahead of taxes and every other type of of unsecured claim. So if a person files a bankruptcy case, other creditors get nothing until back child support and alimony is paid in full.

For a debtor in bankruptcy, this is not a bad thing. If the debtor has any assets, it is better for them to be paid to domestic support obligations than anything else. That’s because domestic support obligations can never be eliminated in bankruptcy.

Divorce and bankruptcy don’t mix easily. If you are facing financial problems as well as divorce, find a lawyer who knows about both. Look here on the Bankruptcy Law Network.

And in Illinois and Wisconsin, call Lakelaw to help you with your bankruptcy case when facing divorce.

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