The past 18 months have been challenging for many households, and now that the world is trying to return to a life resembling the one we all remember some budgets are not rebounding. While the percentage of bankruptcies are down year over year, many analysts think those numbers are likely to increase. Many households have been able to remain afloat thanks to stimulus money and moratoriums on foreclosures and evictions, and as these safeguards are expected to expire before the end of the year, it could be a perfect storm of financial problems. Unemployment numbers have not leveled and an increase in bankruptcies may be a reality going into 2022.
It took the court system time to adjust to Covid restrictions and social distancing requirements, and during the pause a backlog of cases formed. Well-meaning parties who filed for modification requests are still waiting for attention. Without modification, some parents may find they’re unable to pay various court ordered support payments, like alimony and child support. So, what happens if your ex files for bankruptcy? Can your payments be discharged?
Bankruptcy and Domestic Support Payments
Alimony and child support payments are treated differently during the bankruptcy process. If a party owes child support or alimony, the debt cannot be simply eliminated by filing for bankruptcy. If your ex owes you back payments and is not currently making payments toward the court order, then whether you get the money owed will depend on the bankruptcy protection filed. When a party files for bankruptcy protection, the court will review their debts and assets. During this process, the court labels some debt as “nondischargeable” which means they are too important to be written off or eliminated. Domestic support payments like child support and alimony fall into the category of nondischargeable debts.
Ongoing Domestic Support Payments vs. Back Payments
When reviewing how bankruptcy protections handles domestic court ordered payments, we need to separate the conversation into two categories – ongoing payments and past due payments (back payments.) When a party going through bankruptcy goes through Chapter 13, they must certify they’re current on all ongoing child support or alimony payments. Additionally, if your ex-spouse files for Chapter 7 bankruptcy protections, ongoing child support and alimony payments are required. The automatic stay that covers most other debts in bankruptcy do not apply to priority debts like domestic support payments.
Back Child Support in Chapter 13 & 7 Bankruptcy
When discussing past due domestic support obligations, both Chapter 13 and 7 bankruptcy actions regard domestic support payment as a priority debt afforded the highest preference. Child support and alimony payments will be among the first category of debts to receive payments of proceeds distributed from a Chapter 7 bankruptcy. In a Chapter 13 repayment schedule, all domestic support payments would be included in the monthly repayment plan, and before a discharge can be obtained, all back payments must be made current. While the bankruptcy will not discharge any domestic support debts, you may still not receive a payment from the bankruptcy depending on your ex-spouse’s assets.
If you need assistance with a court-order modification or divorce related issues, our dedicated attorneys are available for a consultation. Call today at (931) 361-4477 to schedule an apointment to discuss your case.