Many bankruptcy clients are subject to various debt obligations as a result of divorce decrees or separation agreements. These obligations can be significant, and are often in the form of spousal maintenance and child support. While we discourage clients from using the bankruptcy process to avoid obligations to their former spouse or children, the laws regarding discharge of those obligations often affect outcomes for clients who are simply trying to get their finances in order. If you are considering filing for bankruptcy, it is important for you to understand what can and cannot be discharged in bankruptcy.
Under the 2005 amendments to the federal bankruptcy code, a debtor may not discharge a domestic support obligation. 11 U.S.C. 523(a)(5). What this means, generally, is that a debtor cannot discharge any court sanctioned obligation to a spouse, former spouse, or child of the debtor that is “in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit).” 11 U.S.C. 101(14A)(B). It is important to note that the statute does not require that the obligation be specifically called a domestic support obligation, alimony, maintenance, or child support. It must only be “in the nature” of those obligations. Additionally, if the debt is recoverable by the spouse, former spouse, or child, as is the case where the parties are jointly liable on a debt, it may be excluded from discharge.
If you are interested in filing for bankruptcy or learning more about your options and how filing may affect your specific obligations, please call the Law Offices of John Schmidt and Associates. We will be happy to assist you through the process.If you are in Kentucky, then I’d recommend that you call my office at 502-587-1950 or 502-509-1490 to schedule a consultation if you have an agreement, parenting schedule or court order to discuss your options.