Child Support And Alimony In Bankruptcy
We know that no two bankruptcy cases are exactly alike and that there are many factors that must be taken into account when examining a person’s debt before it can be discharged. We know many people have questions about what happens during bankruptcy proceedings if a person receives or is paying child support or spousal maintenance (alimony) payments. The bankruptcy code defines these as “domestic support obligations.”
This is an important topic that we want to briefly cover today. Please remember that you should always speak with a qualified Arizona bankruptcy attorney before making any decisions with your case.
If You Are Paying Child Support Or Alimony
Millions of Americans pay child support and/or alimony payments each year. We know that many get behind on payments over time and this creates a debt. While it may seem like an attractive idea to file for bankruptcy in order to directly discharge those debts, that is not what will happen. Court-ordered child support payments and debt cannot be discharged during bankruptcy proceedings. In most cases, alimony payment cannot be discharge either, especially if it is used as direct spousal maintenance (we will discuss this below).
Just because these debts cannot be discharged does not mean bankruptcy should not be considered. Both Chapter 7 and Chapter 13 bankruptcy can help a person get all of their debts under control so they can reprioritize the court ordered maintenance and support payments.
If You Receive Child Support Or Alimony
If you are struggling with debt and you receive child support payments or alimony payments, you may wonder if this “income” will be touched during bankruptcy proceedings. According to Arizona state law, these both child support and spousal maintenance payment are exempt is they are pursuant to a court order. You will continue to receive them.
As you are going through the bankruptcy process, whether Chapter 7 or Chapter 13, both of these payments are essential to your ability to rebuild and get back on your feet financially.
If you are divorced and have a property division settlement with your former spouse, you should know that any property that is not given as a result of direct spousal maintenance may be dischargeable during bankruptcy proceedings. Many times, the court will label certain assets in a divorce as spousal maintenance that when they are actually not necessary for the receiving spouse to maintain their basic necessities.
Not all division or property settlement agreements are going to meet the threshold of being necessities for the other party. This can include vehicles, real estate, furniture, artwork, or any other property that is part of a divorce settlement.
What You Can Do Now
If you make child support or spousal maintenance payments, it is important that you do everything you can to meet your obligations. Arizona takes child support seriously, as these are payments meant to assist in the care of minor children. By not paying child support, a person can face severe consequences, including jail time, reports to credit bureaus, fines, and liens against a home or other real estate. While bankruptcy will not discharge your court-ordered obligations, it can help you get back onto firmer financial ground so you can meet them.
When dealing with divorce settlement debts, a bankruptcy attorney will be able to help you navigate the difference between Chapter 7 and Chapter 13, as their nuances can make a difference in these cases. If you are considering bankruptcy after examining all of your debt, please seek help from a qualified Arizona bankruptcy attorney who can guide you through the entire process.
Click here for information on what happens if your bankruptcy case gets dismissed.