Bankruptcy Law Stipulates Domestic Obligations Stay Intact

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domestic support bankruptcy

In accordance with bankruptcy laws, child support obligations and alimony payments established in a state divorce decree are not dischargeable in a bankruptcy filing. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) passed by Congress in 2005 has broadened the scope of divorce-related obligations that cannot be cancelled in the bankruptcy process. Specifically, these bankruptcy laws now refer broadly to any debt or obligation established in a divorce decree as a “domestic support obligation” and the law provides that all such obligations cannot be discharged in bankruptcy.

Prior to this change in bankruptcy law, a debtor could, in some cases, cancel debts owed to ordinary creditors (such as credit card debts), as well as an ex-spouse, even if a divorce decree provided that the debtor was supposed to assume responsibility for that debt payment. The only obligations created by a divorce decree that were considered sacred, or non-dischargeable, were obligations to provide direct financial support to an ex-spouse or children (e.g., alimony or child support). With the change ushered in by BAPCPA, there is no longer such a distinction. Any obligation set forth in a divorce decree must be honored.

This obviously makes the disposition of a divorce case more critical than ever. The assignment of obligations to pay debts in a divorce decree can no longer be avoided in bankruptcy.

Third Party Creditors, Joint Filing, and Bankruptcy Law

To be clear, a debtor can, according to bankruptcy law, cancel the debt owed to the underlying creditor, preventing them from pursuing collection legally. The obligation to the ex-spouse to pay the debt, however, remains and can be enforced by the ex-spouse through contempt proceedings in state court. While third-party creditors will no doubt pursue the ex-spouse who has not filed bankruptcy, that spouse can turn to the state court for help in compelling the debtor to live up to their obligations under the divorce decree.

Of course, if both spouses or ex-spouses need to file bankruptcy, debts to third parties can be cancelled in bankruptcy without disadvantage to either husband or wife. Indeed, many couples file and complete their bankruptcy together prior to divorce in order to save money with a joint filing versus a more expensive option of filing bankruptcy separately after divorce.