Bankruptcy will not write off child or spousal support debts. However, the Code does not consider some of your specific divorce debt as support.
We are in a series of blog posts about particular kinds of debt which bankruptcy may not discharge—write off. So far, we have covered criminal fines and restitution, and income taxes.
Child and spousal support are more like criminal debts than income taxes. Bankruptcy does not discharge a criminal debt, as long as it is a criminal, not a civil, obligation. But, it discharges income tax debts that meet certain conditions. Bankruptcy directly does not discharge child and spousal support, if it fits bankruptcy’s definition of support.
No Discharge of Support
Bankruptcy law is clear that neither Chapter 7 “straight bankruptcy” nor Chapter 13 “adjustment of debts” discharges support debts.
Section 523 of the U.S. Bankruptcy Code lists the “Exceptions to discharge.” It includes, “A discharge under [Chapter 7] does not discharge an individual debtor from any debt—(5) for a domestic support obligation…” Section 523(a)(5).
Chapter 13 states the same thing by incorporating this Chapter 7 exception to discharge in its list of exceptions. Section 1328(a)(2).
What is Considered Support in Bankruptcy?
Therefore, a bankruptcy will not discharge money owed on a domestic support obligation. However, what does that phrase mean? What does it include and what might it not include?
The Bankruptcy Code’s definition of a domestic support obligation is 221 words long, containing ten clauses. Section 101(14) of the Bankruptcy Code. The Code appears to define the term broadly and seems to include anything sensibly considered a child or spousal support. This broad definition may consist of the debt owed not just to your ex-spouse or your child, but also a current spouse (through a separation agreement), or the parent, legal guardian, or responsible relative of a child (based on a court order of support, even if not biologically your child). In other circumstances, courts may consider non-court ordered debt as support. The court can base the decision on a separation agreement or a determination made per applicable nonbankruptcy law by a governmental unit.
However, there aresome limitations. For example, the court will often assign collection for support obligations to someone other than the ex-spouse or child. Usually, the assignment will be to a state or county support enforcement agency. If this happens, the law still considers the obligation as support. However, a support obligation may no longer be considered a support obligation when the owner of the debt assigns it to a nongovernmental entity for collection. That is, the support is not considered support “unless that obligation [was] assigned voluntarily by the spouse, former spouse, child of the debtor, or such child’s parent, legal guardian, or responsible relative for the purpose of collecting the debt.” Section 101(14)(D).
Obligations “In the Nature” of Child or Spousal Support
Sometimes a domestic relations court will call something support that isn’t. The bankruptcy court does not have to accept what your divorce court labeled as support.
The definition of a domestic support obligation (that is, support) includes the requirement that it be “in the nature of alimony, maintenance, or support” on behalf of the pertinent person. Section 101(14)(B). If it’s not, the debt may be dischargeable.
“Support” That Might Be Dischargeable in Bankruptcy
For example, a debt that’s labeled as support might not be in the nature of support if it is a “property settlement” obligation mislabeled as spousal or child support.
A property settlement obligation involves the resolution of a marital asset or debt. For example, you may owe money to your ex-spouse in return for receiving more than your share of marital assets. Alternatively, you may owe in return for your ex-spouse taking on what had been a joint debt. If a divorce judge requires you to pay support for what is actually a property settlement, the debt may be discharged in bankruptcy.
The Difference This Can Make
Chapter 7 discharges neither support nor property settlement debts. However, Chapter 13 can discharge property settlement debts.
So, if you have an obligation called support that is not in the nature of support, Chapter 13 is worth researching. Chapter 13 may especially be worthwhile if the debt at issue is significant.
If you owe a debt labeled as support by your divorce court, most of the time it will indeed be in the nature of support. But not always.
You can see that the interplay between divorce law and bankruptcy can get complicated. Talk with your Kalispell bankruptcy lawyer about all of your divorce obligations to get all the relief in which you are entitled.