Friday, October 28, 2011

Divorce debts

There are two major categories of debts incurred during or after a divorce, and it is important to determine the nature of these debts in order to determine whether the bankruptcy court can provide any relief. The first type is a domestic support obligation such as a child support or alimony. As you may expect, neither the ongoing support payments nor past due payments can be discharged in bankruptcy, and the automatic stay from a bankruptcy filing does not stop the collection activities on these obligations.

The second type of debt incurred during or after divorce is one owed to a spouse, former spouse, or child under a separation agreement or divorce decree. A common example here might be a provision requiring the debtor to pay a credit card of the ex-spouse. These debts are non-dischargeable in most cases, although filing a bankruptcy petition will temporarily stop the collections on these debts. In the process of reviewing bankruptcy options, it is important to review divorce papers to figure out what the obligations are to an ex-spouse.

If someone is required to pay the attorney's fees to an ex-spouse's lawyer, this type of debt is a little tricky to categorize. It is often considered a support obligation because these awards are usually made to assist the other spouse in a divorce case just as an alimony award would. However, there are bankruptcy court decisions that have found some of these awards to go into other categories of debt, sometimes even allowing them to be discharged.

A petition in federal bankruptcy court may not provide quick and easy relief from these obligations, but some relief may be available from a state-level superior court because there are rules that allow for the modification of a support order or divorce decree. These options should be considered in the process of managing a debt problem. It may be helpful to find a lawyer competent in both bankruptcy and domestic relations. [Edited 2017-08-26.]

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