Federal bankruptcy law allows you to file for bankruptcy when you are behind in your alimony and child support payments. However, although filing for bankruptcy permits you to stop paying alimony or child support arrearages temporarily, it will not eliminate this past due child support or alimony debt. You will also remain responsible for paying future domestic support obligations as they become due.
Filing bankruptcy begins something called "the automatic stay." The stay stops all creditors from attempting to collect a debt from the debtor for a limited period of time after the debtor files for bankruptcy. However, alimony and child support are priority claims under section 507(a)(1) of the Bankruptcy Code and non-dischargeable claims under section 523(a)(5). Therefore, you must still make child support and alimony payments while the stay is in effect, even though the stay temporarily stops the collection of any arrears. While not an absolute, the stay usually lasts until the debtor receives a discharge of all eligible debt, the property at issue is no longer part of the bankruptcy estate, or a judge lifts the stay as requested by a creditor.
Chapter 13 bankruptcy, which involves the repayment of debts, requires a debtor to pay the total balance of past due child support and alimony through the repayment plan. In addition, the debtor must continue making support payments as they become due, unless the recipient agrees to another payment arrangement. Usually, the repayment plan gives the debtor an opportunity to catch up on past due alimony and child support payments and avoid going to jail if this is a risk. The bankruptcy trustee then forwards the payments to the party owed. Bankruptcy does not stop present or current child support or alimony payment obligations. Failing to pay all domestic support obligations that come due after filing for bankruptcy is grounds for converting your Chapter 13 into a Chapter 7 or a dismissal of the case altogether. Your Chapter 13 plan can also be denied confirmation if you do not stay current on required domestic support obligation payments.
Chapter 7 bankruptcy involves the sale of a debtor's assets to pay his debts. It does not reduce or eliminate the obligation to pay past due and current child support or alimony, since these are priority claims. As a result, these debts receive payment before other unsecured creditors in a Chapter 7 bankruptcy. However, Chapter 7 will eliminate all other eligible debts, which often makes it easier to pay child support and alimony.
Marital Property Settlements
Martial property settlements arising out of divorce or separation agreements are not the same as alimony or domestic support obligations. Such settlements are also non-dischargeable in a Chapter 7 bankruptcy. However, they may be dischargeable after the completion of a Chapter 13 bankruptcy.