There must be something in the air with the recent plight of family law and bankruptcy matters that have arisen. I represent both debtors and creditors in these cases. That means I have clients that are divorced and wish to get rid of some debts related to their divorces in bankruptcy. And I have clients who are the ex-spouses and want to prevent the debtor from discharging their debts in bankruptcy.
Sometimes it’s child support, an equalization payment, community reimbursement, attorney’s fees from the divorce or other similar debts. The interesting thing is that in some ways I should not be needed because either the debt is dischargeable or it is not as matter of law.
The law, however, evolves as it is amended and interpreted. This sometimes makes it necessary to get it before the court for a determination of dischargeability, and sometimes the court struggles with finding the right answer itself.
The bankruptcy code provides two provisions that make certain family debts non-dischargeable in certain circumstances (meaning even if the debtor files, the debtor will still owe that particular debt after the bankruptcy process is completed).
First, “domestic support obligations (DSO)” are not dischargeable, i.e., child support and alimony. While that is fairly straightforward, things can get tricky. For example, when the family law court orders debts divided in a certain manner, and one spouse responsible, sometimes the order for the spouse responsible for paying the debt is in the nature of support, sometimes not. A DSO is not dischargeable in either Chapter 7 or Chapter 13.
Second, debts “incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record” are not dischargeable. Taken together with DSO, not a lot is dischargeable. Note, however, that a non-DSO debt arising in the course of a divorce or separation is dischargeable in Chapter 13 (it’s sometime referred to the Chapter 13 super discharge). So a debtor can get rid of some family law obligations in Chapter 13, just not DSO.
This second one involving separation and divorce can get tricky quickly. What about a debt to a third party such as an attorney that represented the debtor in a family law proceeding? What if the case was converted from a 7 to a 13? What if the divorce pre-dates the 2005 amendments to the Bankruptcy Code? It gets sticky quickly, and there is not always a straightforward answer.
If you are a creditor or debtor dealing with these kinds of debts, seek advice of counsel. Some things that may appear crystal clear, may cause you problems in the long run.
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