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Alimony in Bankruptcy

There are many life events that lead individuals to file for bankruptcy, with divorce being a common one. Divorce can have a profoundly negative impact on a person's finances, and bankruptcy may help get them back in order.

There are, however, a few limitations. Bankruptcy usually cannot eliminate alimony or child support obligations. Fortunately, though, bankruptcy may help eliminate other debts, freeing up money for support payments.

How Bankruptcy Treats Alimony

If you are the party seeking support payments, the bankruptcy court views child and spousal support and as superior to most other creditors. As a result, those obligations are usually met first.

If, on the other hand, you are the party paying alimony, you will not be able to discharge this debt through bankruptcy. However, you may be able to discharge numerous other debts through bankruptcy, including:

By eliminating these debts, you may be able to free financial resources to make alimony and child support payments. In addition, if you feel you simply cannot meet your alimony obligations, you may be able to return to divorce court to seek a reduction.

Remember, though, that bankruptcy treats alimony debts as if you never filed for bankruptcy; they survive past your bankruptcy filing. This is important for both parties to the divorce, as it may alter their bankruptcy decisions.

Potential Benefits of Bankruptcy

In Chapter 7 bankruptcy, you may be able to discharge several kinds of unsecured debts, including the ones listed above. Chapter 7, though is designed for people with limited income.

If you have more assets and a steady source of income, Chapter 13 bankruptcy may the best choice for you. Through Chapter 13, you may be able to:

  • Save your home from foreclosure
  • Keep your car out of the hands of creditors
  • Enjoy the benefits of the automatic stay

The automatic stay temporarily prevents creditors from harassing you. This may help you in solving your financial problems and taking care of your divorce proceedings without worrying about collection agencies.

Moreover, filing for bankruptcy may eliminate a creditor's lien on your property. This, though, requires you to take certain procedural steps during the bankruptcy process. A local lawyer can help you sort through these requirements.

One limitation of Chapter 13 is that it will still require you to pay your child support and alimony debts in full, although you may be able to include missed payments in a three-to-five year repayment plan. However, by paying off debts through your restructured Chapter 13 payment plan, you may be able to get your financial house in order.

Divorce can be a messy, painful process, but it does not have to lead to your financial ruin. Connect with a local bankruptcy attorney today to learn more about dealing with child support or alimony in bankruptcy.

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