Alimony and support come under “domestic support obligations” in the U.S. Bankruptcy Code. These obligations arise from divorce decrees, separation Agreements or other legal documents. In this context, the creditors would be children, spouses, former spouses, those responsible for children and governmental units. An individual who have filed a petition seeking relief under the Bankruptcy Code is not relieved of a debt incurred from alimony and support.
At times, alimony and child support debt can become so heavy that the debtor opts for Bankruptcy. However, bankruptcy is not a good option to do away with child support or alimony. Bankruptcy might, however, help in reducing unsecured debts and thereby making child support and alimony affordable.
In the bankruptcy context, there are two sides to child support and alimony. One is with regard to payment of child support and alimony, and other with regard to its receipt. Alimony and support owed to a spouse or former spouse are priority debts and are non-dischargeable under Section 523(a)(5) of bankruptcy code.
Under federal law, a bankruptcy filer who receives child support or alimony will get it exempted from creditors and from the bankruptcy trustee. Therefore, the receipt of child support and alimony does not affect the amount to be paid to unsecured creditors in a bankruptcy proceeding.
Bankruptcy results in an automatic stay to all collection activities. However, those collection activities related to alimony and child support will not be halted pursuant to an automatic stay. Additionally, the automatic stay will not affect the reporting of overdue child support to any governmental agency.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 provide child support and alimony claims priority over any other claims. A person who is owed back payments shall file a proof of claim with the bankruptcy court to receive payment. Information on the deadline for filing a claim and a proof of claim form to complete and file will be provided by the bankruptcy court.
If there is a claim for alimony and support, a trustee in bankruptcy must give the claimant and claimant’s state’s Child Support Enforcement Agency written notice of the bankruptcy and any discharge given to the debtor. If a person is listed as a creditor in a bankruptcy petition s/he would receive notice from the bankruptcy court of the filing and information about the date and time of the first meeting (341 meeting) of creditors.
Pursuant to bankruptcy Code, a debtor is permitted to pay his/her arrears through a repayment plan. Chapter 13 bankruptcy gives the person, who owes alimony and support arrearages, a chance to keep all assets by paying arrears in installments through a repayment plan. The repayment plan period may range from three to five years. The debtor will have to maintain both regular support payments and the Chapter 13 plan payment without making any default. However, Chapter 7 bankruptcy filing does not affect alimony and support debts because these are non-dischargeable debts and remain unchanged throughout the Chapter 7 bankruptcy process.
