If you’re going through bankruptcy, there are many debts that you’ll be able to discharge, or write off. One obligation that will not go away, however, is your child or spousal support. Except under one very specific and rare exception, support is still your obligation.
Support is not, of course, the only debt that can’t be discharged in bankruptcy. Other debts that fall into that category include criminal fines and income taxes. Under some conditions, bankruptcy will discharge income tax debt, but criminal debt is not discharged, as long as it truly is criminal and not civil. Similarly, neither Chapter 7 nor Chapter 13 bankruptcy will discharge child or spousal support, as long as that debt is in line with bankruptcy’s definition of support.
So how do you know if your child support is considered support in bankruptcy? The Bankruptcy Code’s definition of “domestic support obligation” is lengthy and complex, but it covers anything that would be considered child or spousal support. It doesn’t matter if it’s money owed to your ex-spouse or child according to a divorce decree or custody agreement, or a debt owed to a current spouse through a separation agreement. It does not necessarily need to be court-ordered, it just needs to be “in the nature of alimony, maintenance, or support.”
What’s the exception to the rule? If the support is “assigned to a nongovernmental entity” for collection, it doesn’t fall under the umbrella of support any longer. In that case, it would be discharged. It might also be discharged if it’s not really support, but rather the settlement of a debt. If, for instance, you owe money on what had been a joint debt, and you’re paying it to your ex-spouse as a form of support, it’s actually considered a “property settlement” rather than support.
When can a property settlement be discharged? If you’re doing a straight bankruptcy (Chapter 7), you won’t be able to write off child support, spousal support, or property settlement debts. On the other hand, if the bankruptcy you’re filing is an “adjustment of debts” bankruptcy (Chapter 13), your property settlement debts will be dischargeable. Therefore, if you’re paying a large property settlement, but it’s being labeled as support, Chapter 13 might be worth looking into.
If this all seems complicated and confusing, you can trust the compassionate, dedicated attorneys at Cutler & Associates to help you navigate the unfamiliar terrain of bankruptcy while keeping your best interests in mind. A Chicagoland bankruptcy firm, we have clients throughout the Chicago metropolitan area and work hard to make sure our clients get what they need. Our offices are conveniently scattered throughout the area, with locations in Aurora, Chicago, Hoffman Estates, Lisle, Naperville, Oak Brook, Schaumburg, and Skokie. Contact us through our website, or call (773) 360-5802 for more information.