“If I go Into Bankruptcy, Will I Still Need to Pay Alimony and Child Support?”
Bankruptcy won’t eliminate your obligation to pay alimony or child support. Many see bankruptcy as a way to free themselves from any and all debts and start their financial life all over again, but that’s not always the case. The federal Bankruptcy Code includes a number of exceptions to the general rule of debt discharge.
There are two types of bankruptcies. A Chapter 13 bankruptcy involves reorganization, a court ordered payment plan, which generally provides an individual with some financial breathing room to pay off his or her debts. A Chapter 7 bankruptcy is considered liquidation of debts, in which assets are sold and debts paid based on which creditors have a legal priority. Debts, with some exceptions, are then discharged.
Any financial support, whether labeled family support, alimony, or child support, is non-dischargeable to the debtor (the debt can’t be eliminated) by the Bankruptcy Code. The spouse or former spouse getting support does not need to file any type of proof of claims or objections to the Bankruptcy Court (like a creditor would) to enforce his or her right to continue to receive support.
In most bankruptcy cases, after the debtor files for bankruptcy protection, creditors must stop all attempts to collect their debts, known as an “automatic stay.” This stops foreclosure actions, wage garnishments, bank levies, and creditors contacting the debtor. This automatic stay is not applicable to enforcement of child support or alimony collections; rather, for public policy reasons, collection of these obligations is a priority under the Bankruptcy Code.
Garnishment order(s) that cover collecting past due support may also be stayed during a bankruptcy proceeding. The party owing the support can propose a repayment plan for child support arrears in a Chapter 13 case.
If a party is seeking an increase of child support, normally, family court will not consider the support motion until the bankruptcy case is finished or the Bankruptcy Judge has referred the family court matters back. A family judge also may rule on a party’s motion to bring part of the bankruptcy matter back to family court.
If a party is ordered to pay alimony and child support and then goes into bankruptcy, he or she may seek protection from paying for debts that fall outside those categories. If, as part of a divorce settlement or judge’s decision after trial, one party agrees or is ordered to pay the legal fees of the other party, or provide an amount of money as part of a division of assets, the Bankruptcy Court has discretion to consider such obligations as part and parcel of a support obligation. Some Settlement Agreements state expressly that failure to perform any financial obligations of the Agreement shall be deemed a support obligation and thus permit the disappointed party to seek modification of the Agreement to create equity.
In sum, child support and alimony payments can present difficult and complex issues, even if bankruptcy isn’t involved. If you have any questions about these issues or need legal representation to protect your interests or legal rights or those of your child, contact experienced matrimonial attorneys who can positively affect negotiations and court outcomes during your legal process.
To get started, call the Central Jersey law offices of Hanan M. Isaacs, P.C., at 609-683-7400, or contact us online, for a near-term reduced fee initial consultation. We will listen to your facts, explain the law, and guide you on the best pathways to economic and social justice. Call us now. You will be glad you did.