You and your spouse have decided to separate. You have decided who will move out and even who will have custody of your children. Inevitably, the discussion will turn to support, both child and spousal. How much is enough? Why should he get spousal support if I have the kids? Why should I pay at all? In some of these discussions, one party throws out the dreaded “B-word” – bankruptcy.
Bankruptcy is more than what you declare when you lose at Monopoly or what takes all your money on “Wheel of Fortune.” Bankruptcy is the government’s way of allowing people to get rid of their debt and have a chance at a fresh start. But what effect does bankruptcy have on a person’s support obligations? Consider the following three situations.
Situation One: Rick and Kate are discussing their Property Settlement Agreement, and have decided that Kate will have custody of their two children. When Kate asks Rick to pay $500 per month for spousal support and $1500 per month for child support, Rick says “I just can’t afford any support right now, and if you get a court order I’ll be forced to file bankruptcy and won’t have to pay anyways. Why not just agree now that I don’t have to pay so we can all avoid the headache.” Kate reluctantly agrees.
Situation Two: Rick and Kate have been divorced for five years. Their Final Decree of Divorce requires Rick to pay monthly child and spousal support payments of $1500 and $500. Until recently, Rick has been paying this amount on time, but in the last five months Rick hasn’t paid any money towards either support obligation. When Kate calls to ask when he will be making up the $10,000 in missed payments, Rick says “I’m filing for bankruptcy, and the government will be getting rid of that debt for me. I’ll start paying support again in a couple months, but I don’t have to repay that $10,000.”
Situation Three: Rick and Kate have been divorced for five years. Their Final Decree of Divorce requires Rick to pay monthly child and spousal support payments of $1500 and $500. Rick filed for bankruptcy five months ago and hasn’t paid any money towards either support obligation since filing. When Kate calls to ask why he hasn’t paid any support, Rick says “You know I filed for Bankruptcy. Uncle Sam took care of all of that for me, and I’m not going to pay one more penny.”
Is Rick right in any of these situations? No.
The Bankruptcy Code allows individuals (debtors) to discharge, or eliminate, most but not all of their debts by filing bankruptcy. The Code specifically sets out several kinds of debts that individuals cannot get rid of, no matter how large. Section 523 of the Bankruptcy Code makes it clear that bankruptcy will not get rid of an individual’s debts owed for a “domestic support obligation.” But what qualifies as a domestic support obligation?
Section 101 of the Bankruptcy Code defines “domestic support obligation” as any debt that accrues before, on, or after the date a person’s debts are discharged through bankruptcy that is owed to a spouse, former spouse, or child of the debtor (or the child’s parent or other legal guardian) that is in the nature of alimony or support created by a separation agreement, divorce decree or other court order. In other words, Bankruptcy does not allow your spouse to get rid of their child and spousal support obligations, whether in a Property Settlement Agreement or Final Decree of Divorce.
Let’s turn back to Rick and Kate.
In Situation One, Rick is wrong about bankruptcy. Filing bankruptcy would not eliminate Rick’s obligation to pay child and spousal support. If Kate agrees that Rick doesn’t have to pay her any support, well, Rick won’t even need to try to file bankruptcy to avoid that payment.
In Situation Two, Rick is wrong again. Any debt for unpaid child or spousal support is not going to be dischargeable through bankruptcy. If Rick still refuses to pay after being told that he’s wrong, Kate may need to pursue a legal action against him but one way or another she is entitled to receive the missed support payments.
In Situation Three, Rick is (unsurprisingly) wrong yet again. Section 101 says that a domestic support obligation is one that accrues “before, on, or after” a debtor’s bankruptcy discharge. Just as bankruptcy won’t get you out of previously-missed support payments, it will not let Rick stop supporting his former spouse and children after discharge.
Bankruptcy is a very powerful tool providing Americans the right to a fresh financial start. But not even bankruptcy will allow a parent or former spouse to escape their duty to pay child or spousal support.
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