Family law and bankruptcy go together frequently as it’s common for recently divorced debtors to file bankruptcy as well. It’s an unfortunate stress to heap onto personal family problems, but because wealth often changes hands in divorce—and debts are often created—it’s important to know the relationship between obligations that arise after divorce and bankruptcy. Here are three things to know.
- The umbrella term the bankruptcy code uses for alimony, support, etc. is “domestic support obligations,” which is defined in section 101(14A) of the bankruptcy code. Domestic support obligations can accrue before, on, or even after the date for the order of relief is entered into the record, and they include interest.
- In § 523(a)(5) and § 523(a)(15) the bankruptcy code distinguishes between debts that are created during divorce as ongoing payments to an ex-spouse and the partition of the marital property. In chapter 7 bankruptcy, neither of these types of debts is dischargeable, even though they are not secured by anything. Domestic support obligations are among the few debts that are so strictly regulated. Debts owed to victims of the debtor’s drunk driving are another example.
- In chapter 13, however, things are different. § 1328(a)(2)includes many of the same types of debts in its list of debts that are not discharged, such as the § 523(a)(5) domestic support obligations like alimony and child support payments. It does not include debts incurred during the distribution of the marital property (§ 523(a)(15)). This is a clear break from what goes on in chapter 7.
To recap: In chapter 7, all domestic support obligations are not dischargeable, but in chapter 13, debts incurred during the partition of the marital property are dischargeable.
The implications for strategizing one’s divorce or one’s bankruptcy are clear. Ex-spouses who are dependent on support payments, whether for themselves or children, can rest easy knowing that these debts cannot be discharged. Soon-to-be ex-spouses who know they will incur these debts during a divorce should know that these debts are permanent. People who are owed debts for a portion of the marital estate, such as an interest in a home, should beware that their ex-spouses might be able to discharge that after a successfully completed chapter 13 repayment plan.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.