Bankruptcy and Alimony Payments
Filing for bankruptcy is never an easy decision, and can be a very frightening time. But what if you are a collecting alimony and/or child support from an ex-spouse who is filing for bankruptcy? Understanding your rights and your ex-spouse’s continued obligations here is essential. The attorneys at Maselli Warren are experienced both in divorce and bankruptcy law and can help you navigate these complex issues.
Is my alimony protected
The first thing to know is that the U.S. Bankruptcy Code “that [a] discharge under Section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from domestic support obligations.” Domestic support obligations include both alimony and child support. So if you are filing for bankruptcy for debt relief, understand that these obligations are typically not included in your discharge. If your ex-spouse is filing, then rest assured that your support payments in most cases will be safe.
There are some rare exceptions, however, which is why consulting with one of our attorneys experienced in divorce law and settlement issues can make a major difference in protecting your rightful payments.
There are typically two exceptions to the protections of domestic support obligations from bankruptcy filings. The first is an instance where a payment in a divorce settlement is treated as alimony but its true purpose is not, in fact, domestic support. There are various reasons why divorce decrees might get creative in labeling payments, and in this particular instance such a payment might be considered in bankruptcy relief.
The second instance is if the alimony payment has been assigned to a third party. If your ex-spouse has fallen behind on payments, it sometimes happens that a third party will take over the obligation. In other words, the third party will pay the alimony payment to the recipient (you), and the alimony from the spouse responsible will then be assigned to that third party. Thus the ex-spouse will no longer owe the alimony payment to his or her ex, but rather to this third party.
In the case of such an assignment of alimony to a third party, it is possible that in a bankruptcy filing alimony will be considered a regular debt and thus will be discharged as part of the bankruptcy filing.
Especially in the case of such third party assignments, it is often times a family member who takes on such an assignment. In any event, you want to make sure that you and your loved ones’ interests are protected. If your ex-spouse pays child support and/or alimony and is filing for bankruptcy protection, you want to ensure that your rights are secured. The divorce and bankruptcy attorneys at Maselli Warren are here to assist you.