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Support Obligations in Bankruptcy

July 21, 2011

Child and spousal support obligations are treated with great respect in bankruptcy. This is true about both ongoing support payments and any back support payments you might have accrued.

The hard truth is that bankruptcy can only provide limited help in this area. HOWEVER, that help may be just what you need.

First, what bankruptcy CAN’T do:

  1. It can’t reduce your ongoing monthly support obligation. You have to go back to divorce court to do that. The bankruptcy court has virtually no power here.

  2. It can’t write off (“discharge”) any back support, under either Chapter 7 or 13. Once you owe a particular month of child or spousal support, that amount has to be paid one way or the other. That is why if you have grounds for reducing your support obligations, you should address that in divorce court as soon as possible.

Now, what bankruptcy CAN do:

  1. If you owe back support, a Chapter 13 case allows you to catch up on that arrearage WHILE being protected from all the very aggressive collection methods that can be used against you to repay that arrearage. This is a tremendous advantage, stopping not only garnishments of wages and bank accounts, but also preventing or undoing suspensions of drivers’ and occupational licenses. Also, paying this support through Chapter 13 in many situations simply reduces what you would otherwise be paying to your other creditors during your case. In other situations your back support adds to how long you must pay into your Chapter 13 Plan, but even that is usually a good deal for you because of the protection you get while you are in your Chapter 13 case and complying with the terms of the Plan. NOTE: This protection does NOT apply to Chapter 7—these kinds of collections can continue against you during a Chapter 7 case.

  2. If you owe back support, and you have an “asset” Chapter 7 case, then that back support obligation will be paid by the trustee first, before any of your other creditors. Even before taxes. These “asset” cases are unusual because most Chapter 7s are “no-asset”: the trustee does not take any of your assets to liquidate and distribute to your creditors because everything you own is “exempt.” But IF you DO have an asset case, and owe back support, some or all of that may be paid by the trustee.

Support obligations have to be treated very carefully in bankruptcy. Otherwise these very special debts can create havoc with the rest of what your bankruptcy is trying to accomplish. So your support situation is a critical part in deciding whether to file Chapter 7 or 13, and how to proceed with either option. So even if your ex-spouse or the state is not currently enforcing an ongoing support obligation or is not chasing a past-due one, be sure to tell your attorney all about it.