How Are Child Support and Alimony Affected by Bankruptcy?
The Fragile Middle Class states that 40 percent of all bankruptcies are a direct result of divorce, medical crisis or unemployment. It is safe to say that many people each year will face the financial problems created by divorce, and many of them will file bankruptcy as a result.
Bankruptcy Does Not Discharge Support
One fact that is important to remember is that bankruptcy does not discharge support obligations. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 or BAPCPA provides protection for former spouses and children who are owed support. Additionally, family law claims enjoy priority status when the trustee decides who will get paid first from any available funds.
Even more important, the BAPCPA does not protect debtors with an automatic stay for certain family law claims. Unlike other creditors, the state or the former spouse can prosecute a case for alimony or child support outside of the stay. However, collecting back child support may be more of a problem. In some cases, judges have allowed a debtor to discharge back support obligations but refused to discharge current support amounts.
What If I Cannot Pay?
One thing that bankruptcy does do to protect the debtor is to allow him or her to use evidence of bankrupt status to argue a reduction in child support or alimony payments. This is particularly effective if the debtor has lost his or her job and is living on much less than when the support order was originally granted. In some cases, debtors are able to simultaneously pursue a child support reduction claim while filing for bankruptcy.
What Should I Do If I Owe Alimony or Child Support?
Alimony and child support are court-ordered, and therefore should never be ignored. By failing to make payments, you not only incur a debt but also violate a court order which can cause you to be held in contempt. You could serve jail time, face heavy fines or have other penalties imposed on you for ignoring court-ordered payments.
If you are facing bankruptcy and owe child support or alimony, it is very important that you have the help of an experienced bankruptcy attorney like those at the Amerio Law Firm in Sacramento. We can help you find ways to manage your required support payments as well as your bankruptcy filing and protect as many of your assets as possible.