A Morris County Bankruptcy Lawyer Explains
Divorce is the final legal step in dissolving a marriage. However, certain financial obligations may force a continuing relationship to pay a property settlement, child support and/or spousal support. This raises questions of how certain divorce obligations are handled in the aftermath of the divorce and when one party decides to file bankruptcy.
Family Support Obligations in Bankruptcy
In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) changed the way courts handled support obligations in bankruptcy. This amended law removed the distinctions between debts like alimony, spouse support and child support and classified them all as “domestic support obligations”, or DSOs. If these debts are determined to be a DSO it is automatically excepted from discharge in both Chapter 7 and Chapter 13 cases. The primary criteria for determining a DSO are:
- A debt is owed to or recoverable by a “spouse, former spouse, or child”
- The debt is in the “nature of alimony, maintenance, or support”, even if it is not explicitly called such
- The debt was established through legitimate means, such as a court order or divorce decree
In a Chapter 7 bankruptcy, a DSO obligation for arrears, current or future payments will not be discharged after the completion of the case. Non-DSO obligations arising from a divorce judgment, property settlement or court order are not dischargeable in Chapter 7.
In a Chapter 13 bankruptcy, the payment plan will be structured to satisfy any spouse or child support arrears as priority payments. Current DSO payments will have to be made a condition of getting the plan confirmed and to obtain a discharge after completion of plan payments. A Chapter 13 filing offers the advantage of allowing you to satisfy all your debt obligations without necessarily having to liquidate your property and assets.
A major advantage for filing a Chapter 13 is that Non-DSO obligations arising from a divorce judgment, property settlement or court order are dischargeable in Chapter 13. Debts owing for equitable distribution or indemnification of a credit card or other loan may be discharged in Chapter 13.
Your financial condition after the completion of the bankruptcy case may be the basis to obtain a reduced alimony or child support payment through the Family Court.
Your Morris County bankruptcy lawyer can work with you to find a way to meet your obligations while helping you to get back on solid financial footing.
We Are On Your Side When a Divorce Causes You to Consider Bankruptcy
Divorce and bankruptcy cases require qualified and experienced legal counsel. We can help you resolve your financial troubles with domestic relations obligations in bankruptcy when you contact our office. Our Morris County bankruptcy attorneys have the solutions you need when facing hardship.