DOMESTIC SUPPORT AND PROPERTY SETTLEMENT AGREEMENTS ARE NOT DISCHARGEABLE IN A CHAPTER 7 BANKRUPTCY
In a Chapter 7 bankruptcy, the Bankruptcy Code excepts from discharge domestic support obligations. This definition includes any debt that is owed to a spouse, former spouse, child of the debtor, such child's parent, legal guardian or governmental unit that is for alimony, maintenance or support or is in the nature of alimony, maintenance or support. For instance, if the paying spouse agreed to pay certain expenses of the other spouse for a lower support obligation, then this would be in the nature of support and not dischargeable. The definition also includes both pre-petition and post-petition obligations, as well as any interest on those debts. A rare instance in which support is dischargeable is when it has been assigned to another entity for other than collection purposes. The obligation to pay alimony, maintenance and support has always been considered of utmost importance, and the obligations under a marital property settlement agreement has evolved into becoming a top priority in a chapter 7 bankruptcy and also is not dischargeable.
CHAPTER 13 BANKRUPTCY CAN BE USED TO CURE DELINQUENT SUPPORT ARREARS
As in Chapter 7, domestic support obligations are excepted from discharge in a Chapter 13 bankruptcy. Otherwords, debts for alimony, maintenace or support or that are in the nature of alimony, maintenace or support will survive bankruptcy. However, one of the benefits of a Chapter 13 is that you are permitted to pay back your delinquent support obligations over the life of the Chapter 13 Plan, which can be up to five years. Assuming that you make all of your plan payments, upon the completion of the plan all of your delinquent support payments will now be paid off. In order to receive a discharge, it also necessary that you continued making all of your ongoing support payments. In fact, upon the completion of your case, you must certify that all ongoing support payments, as well as any support payments paid through your plan have been paid.
MARITAL PROPERTY SETTLEMENT AGREEMENTS MAY BE DISCHARGEABLE IN A CHAPTER 13 BANKRUPTCY
Another benefit to a Chapter 13 is that you can discharge a marital property settlement agreement. Confusion sometimes arises in determining the definition of a property settlement agreement. The main factors that courts consider in determining whether the debt is in the nature of support or a property settlement agreement are: 1) whether the payments terminate upon the death or remarriage of the spouse who receives the payments; 2) whether the payments are paid over a period of time, as opposed to some type of lump-sum payment; 3) whether the payments are based on the receiving spouse's future earning capacity; and 4) whether the payments are for such items as medical care, mortgage or other basic necessities of life of the receiving spouse. If these factors were contemplated in determining the payment, then the payment will most likely be considered to be in the nature of support rather than a property settlement agreement and therefore not dischargeable. However, debts that you owe to a former spouse that were agreed to in a divorce or separation agreement and are not in the nature of support are dischargeable in a Chapter 13 bankruptcy. In a Chapter 13, it is necessary that you list all of the creditors that you are wanting to discharge. That list would include your former spouse. Also, in order to get a discharge you must complete the terms of your Chapter 13 Plan that was previously confirmed.
If you are faced with similar circumstances or are contemplating filing bankruptcy, then give Pittsburgh Bankruptcy Attorney Rodney Shepherd a call at 412 471-9670 or just fill out our client contact form. You will be immediately called and a free consultation will be scheduled today.