Divorce can be financially devastating. Some individuals starting over may fall behind on support obligations and divorce debt payments. If this is you, you may be wondering if bankruptcy may be the answer.
Bankruptcy attorney Elizabeth Domenico will discuss which bankruptcy options can help you better manage past-due support obligations or divorce debt.
Questions About Bankruptcy & Divorce Debt?
Get a Handle on Past-Due Divorce & Support Obligations
Clients often ask me if there is any way to get rid of paying child support or alimony, or even just debt that they’ve been assigned in a divorce decree through a bankruptcy.
Support Obligations Cannot be Wiped Out
The long and short answer with relation to child support and alimony is that that particular type of debt in bankruptcy is never gonna be able to get discharged.
Which Bankruptcy May Help You
Reorganize with Chapter 13
Now, if you fall behind on your obligation, you can use a Chapter 13 bankruptcy to reorganize what you’ve fallen behind in a more structured payment versus being garnished on your paycheck or your bank account.
How Chapter 13 Works
Chapter 13 allows you up to five years to propose a repayment back to the obligation holder such that it can free up cash flow instead of having a large garnishment taken out of your paycheck or even money directly from your bank account.
You still have to pay your ongoing support obligation. Sometimes we recommend maybe a direct payroll deduction from your employer so that you don’t get further behind. But Chapter 13 bankruptcy can be a way to help with reorganizing that past-due obligation.
What Support Obligations You Can Include
With regards to certain types of debt assigned in a divorce decree, it depends on the nature of what that looks like as to whether or not you can get rid of it.
Example: Debt in Exchange of Alimony
If a judge assigns you a credit card debt but you are waiving maintenance or support, it’s said to be an obligation that you make in lieu of maintenance or support. Therefore, it becomes a domestic support obligation, and you can’t get rid of it in bankruptcy.
Example: Joint Debt
Now, if you have a true joint debt and you are assigned to pay that, and your spouse is not, you can get rid of what we call joint marital settlement agreements in a Chapter 13 bankruptcy.
Chapter 7 & Obligations
Now, Chapter 7 won’t let you get rid of those joint marital obligations. If you were to get rid of and discharge it, your ex could come back against you in divorce court for contempt.
So, looking at your paperwork to determine what type of debt, whether it falls into a non-dischargeable domestic support or just a marital property settlement is something we at the firm do on a daily basis for clients to help determine if bankruptcy, and if so, which chapter, can potentially help them get rid of a lot of debt that they accrued or were assigned in the marriage.