WHAT BANKRUPTCY CAN’T
DO: Domestic Support Obligations part 1
Bankruptcy helps relieve the burden of credit card and loan
debts, medical bills, back utilities and rent, and so forth.
In this blog series of non-dischargeable debt I have not yet
described the different kinds of bankruptcy.
This blog is about marital debt. And it is the ONLY type of
debt in this blog series that is treated substantially different in the two
kinds (or chapters) of bankruptcy you can file. There is a difference with
Intentional Debt, true; but that is the difference literally between one word –
willful AND malicious (Chapter 7) and willful OR malicious (Chapter 13). A big
difference, true, but the difference between the treatment of marital debt is
MUCH greater.
So here is a brief review. The bankruptcy code is divided
into chapters, just like any book. These are the chapters an individual person
can file:
Chapter 7: liquidates/eliminates most debt. You can keep (and
keep paying for) property you still owe – like cars, your house, furniture –
usually as long as you are current and promise to keep making your payment.
Chapter 13: consolidates most of your debt into one payment –
unsecured credit cards, medical bills, your car payment, taxes, sometimes even
your house payment (especially if you are behind).
Chapter 11: This is mostly for corporations, but an
individual can file a Chapter 11 if his debt exceeds the amount allowed in a
Chapter 13. If you owe over $380,000.00 (or so) in unsecured debt, you can’t do
a Chapter 13 and have to do a Chapter 11.
Chapter 12: Similar to a Chapter 13 but for farmers and
fishermen. Most farmers and fishermen owe much more than $380,000 unsecured (and
$1.1 million in secured debt); and cannot contend with the sometimes draconian
rules of a Chapter 11. So Congress made the Chapter 12 – an amalgamation of a
13 and an 11.
But there are some debts that bankruptcy does not affect;
that are “immune” from a bankruptcy discharge - the word is
“non-dischargeable”. This means that when the smoke clears and the bankruptcy
is over, these debts will still have to be paid.
My previous blogs were about taxes, traffic fines, speeding tickets and
their ilk, student loans and all the various types of what I call Intentional
Debt.
Today I’d like to discuss Child Support, Alimony, Maintenance and other marital debt. The Bankruptcy Code calls it Domestic
Support Obligations.
***
So far in
this list of non-dischargeable debts there is little difference in what kind of
bankruptcy you file. The debt will either discharge or survive. The exception
is Intentional Debt’s “willful and malicious” and “willful or malicious”. But
this deals with the INTENT of the debt, not the definition of the debt.
For Domestic
Support Obligations (DSOs), the type of bankruptcy matters a great deal as to
the definition of the debt. DSOs survive Chapter 7 bankruptcy. Period. The
argument in a Chapter 13 is whether the debt is a DSO or not! A debt can be a
DSO in a 7 but not in a 13.
***
18 USC
Section 523(a)(5) & (15) of the Bankruptcy Code says:
(a)
A (bankruptcy) discharge … does
not discharge an individual debtor from any debt— …
(5)
for a domestic support obligation; …
(15)
to a spouse, former spouse, or child of the debtor and not of the kind
described in paragraph (5) that is 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, or a determination made in
accordance with State or territorial law by a governmental unit; …
So what is a
Domestic Support Obligation? The Bankruptcy Code provides a definition in
11 USC Section 101(14A):
The term "domestic support obligation" means a
debt that accrues before, on, or after the date of the order for relief in a
case under this title, including interest that accrues on that debt as provided
under applicable nonbankruptcy law notwithstanding any other provision of this title,
that is‐‐
(A) owed to or recoverable by‐‐
(i)
a spouse, former spouse, or child of the debtor or such child's parent, legal
guardian, or responsible relative; or
(ii)
a governmental unit;
(B) in the nature of alimony, maintenance, or support
(including assistance provided by a governmental unit) of such spouse, former
spouse, or child of the debtor or such child's parent, without regard to
whether such debt is expressly so designated;
(C) established or subject to establishment before, on, or
after the date of the order for relief in a case under this title, by reason of
applicable provisions of‐‐
(i)
a separation agreement, divorce decree, or property settlement agreement;
(ii)
an order of a court of record; or
(iii)
a determination made in accordance with applicable nonbankruptcy law by a
governmental unit; and
(D) not assigned to a nongovernmental entity, unless that
obligation is assigned voluntarily by the spouse, former spouse, child of the
debtor, or such child's parent, legal guardian, or responsible relative for the
purpose of collecting the debt.
***
All right, so with all that legalese, what are we talking
about? Marital Debt is anything you were ordered to pay in a divorce or
separation agreement. Anything. Whether you pay it to your ex-spouse or not.
Child support, alimony, maintenance, obviously. But if you
were ordered to pay other people (friends or former in-laws), a credit card or
the vet bill? Whether it was written in the actual divorce decree, the
settlement agreement, ordered by the judge or in any way connected to the
dissolution or separation.
They are all DSOs. At least in a Chapter 7.
***
Ick, you say. So what can be done about it?
***
I’ll talk specifically about DSOs in a Chapter 7 next time.
Copyright
2016 Michael Curry
My name is Michael Curry and I have practiced law in Mount Vernon,
Fairfield, Flora and throughout Southern Illinois since 1992. During that time,
I have helped more than 5,000 people (and businesses) overcome their financial
difficulties by filing for bankruptcy. As a solo practitioner, I will also be
happy to help protect you and your family’s future with estate planning, wills,
powers-of-attorney, real estate transactions and other legal services.
Please call or text me at 618-246-0993, email me at michael.curry.law@gmail.com or send
me a letter: 123 South 10th Street, Suite 507, PO Box
93, Mount Vernon, IL 62864
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