Many of you who are facing bankruptcy for the first time might ask the question, “Can you get unpaid child or spousal support discharged in a bankruptcy?” The immediate answer to the question is that any unpaid support payments you have been rendered by a court of law to pay, like child support or alimony, cannot today be reduced in bankruptcy.
Prior to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, child and spousal support were categorized as a level seven priority in bankruptcy. Bankruptcy courts prioritize the order in which they will pay creditors in all bankruptcy cases.
In a Chapter 7 bankruptcy, which liquidates your assets to pay your creditors, the creditors get paid in prioritized order until the money is gone or all the creditors filing claims have been paid. The remaining debt not getting paid is discharged from the bankruptcy unless it is an exempted debt. Debts exempt by law from being discharged in a bankruptcy are: child and spousal support, certain taxes, most student loans, court orders against filers, and debts deemed fraudulent by the bankruptcy courts.
The 2005 law placed both child and spousal support as the number one priority in paying creditors in bankruptcy cases. The law no longer distinguishes between the two, and the new law went a step further by allowing Child Support Enforcement (CSE) authorities to ignore the automatic stay of bankruptcy in certain circumstances. Actions to establish or modify paternity or child support are now exempt from automatic stays. Although some restrictions in these cases on collection activities have been relaxed, some restrictions continue to apply.
In a Chapter 13 bankruptcy case, the plan must provide for full payment of priority debts, including any arrears in a domestic support obligation. In order to get any discharges of other unsecured debts in a Chapter 13 case, the filing debtor must certify that all post filing domestic support obligations have been met.
In addition, both Chapter 7 and Chapter 13 case trustees are now obligated to make certain disclosures to domestic support creditors. These creditors might include an ex-spouse or the paternal parent of the receiving end of any domestic support payment judgment.
Whether or not unpaid child or spousal support is discharged in bankruptcy is not always the best indicator of whether you should file. If you are completely bankrupt, you most likely should consider filing bankruptcy. Filing for bankruptcy protection will protect what assets you have left and provide you with the opportunity for a chance at a fresh new start on your financial situation.
Basically, being bankrupt is much more a black and white experience than it is a gray one. As a general rule of thumb, you are completely financially bankrupt if your current sustainable income plus any cash reserves will not pay all of your living expenses, pay interest on outstanding loans, and reduce some of your principal on those loans while paying on them for five years. Paying off debts for five years is chosen because five years is the maximum legal number of years a United States Bankruptcy Court allows an individual to work their way out of bankruptcy protection.
Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.
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