People who file for Chapter 7 bankruptcy in Montgomery County, TX will be able to get rid of most of their debts, including medical bills, personal loans, credit card balances and some other expenses. However, there are some types of debt that cannot be discharged in Chapter 7 bankruptcy—you’ll still be required to make those payments as usual moving forward even after you’ve filed.
Two common examples of nondischargeable debts in bankruptcy are alimony and child support. It is not uncommon for people going through a divorce to file for bankruptcy, as the financial effects of a divorce can be devastating in some circumstances. However, one should not expect to use bankruptcy as a strategy post-divorce to eliminate responsibilities for back child support and alimony.
The bankruptcy code contains specific information about “domestic support obligations,” which are any obligations laid out in a divorce decree, separation agreement, property settlement agreement, court order or other type of legal determination made under non-bankruptcy law. This doesn’t just refer to debts specifically labeled as child support or alimony, but also payments in the style of alimony and bankruptcy. This means that it’s not the title of the payment that is important, but rather the function it serves.
Let’s take a closer look at these two types of payments.
Less than 50 percent of custodial parents in the United States actually receive all the money they are owed under court orders or informal agreements for child support. On average, custodial parents receive less than 70 percent of the total amount they are due.
When a parent fails to pay child support, their debt continues to mount just like any other type of unpaid debt. When this happens, authorities can take action, charging interest on the past due amounts, denying passport use or application, placing liens against real estate, suspending driver’s licenses, suspending professional licenses, making reports to the credit bureau, fining the offender or even charging the offender with contempt, which could lead to jail time.
While a parent can file Chapter 13 bankruptcy to reorganize their debts, including child support, they will never be able to fully discharge their child support obligations, because those payments are the right of the child.
Any money owed to a spouse must meet several requirements to be nondischargeable:
- The debt must be in the nature of alimony or spousal maintenance
- The debt must be owed to one’s former spouse
- The debt must have been incurred with a divorce, separation agreement or property settlement agreement
The primary way to determine that a payment is “support” is if the money is necessary to help the recipient spouse maintain a certain standard of living and afford the basic necessities. The way it is characterized in the divorce decree will be a strong indication.
For more information about alimony and child support as they relate to bankruptcy law and the various other types of nondischargeable debts, contact an attorney knowledgeable in Chapter 7 bankruptcy in Montgomery County, TX like James R. Jones, Attorney at Law today.