On occasion, a divorce may result in one or both of the parties filing for bankruptcy, often without an adequate understanding of the limited relief available in the bankruptcy court.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (”BAPCPA”) directly addressed issues related to the dischargeability of marital debt and support obligations, as well as to the effect of the automatic stay on collection and enforcement proceedings out of divorce and family law litigation.

Under bankruptcy law, a “domestic support obligation” is any debt incurred before or after a bankruptcy filing that is owed to or recoverable by a spouse, former spouse, child or governmental unit; in the nature of alimony, maintenance or support; and established pursuant to the terms of a divorce decree, separation agreement, property settlement agreement, court order or administrative determination.

In Chapter 7 bankruptcy, essentially all marital and domestic relations obligations are not dischargeable, regardless of whether they are support in nature, property divisions or “hold harmless” agreements, provided they were incurred by the debtor in the course of a matrimonial proceeding or a divorce action which resulted in a separation agreement, divorce decree, court order or administrative determination.

A debtor’s obligation to pay marital debts directly to a third party ( ie., pay the mortgage on former marital residence) and to hold the former spouse harmless on said debts is also deemed to be non-dischargeable if the obligation has the effect of providing support to the former spouse. A debtor’s duty to pay the following expenses are usually deemed to be in the nature of support and not dischargeable: educational expenses of a minor child; medical insurance coverage for a minor child; and life insurance, with the minor children as beneficiaries.

Attorney’s fees owed by debtor to his own lawyer are clearly dischargeable in bankruptcy, but as a general rule, attorney’s fees owed by debtor to a former spouse’s attorney are not dischargeable, if the underlying legal proceeding resulted in the entry of an order or judgment directing payment of maintenance or spousal support to the former spouse.

The division of a debtor’s pension benefits during the divorce action is usually accomplished by entering a Qualified Domestic Relations Order (”QDRO”). Since division of a pension is considered to be a transfer by debtor of a present interest in his pension, and as such, it is not a debt that can be discharged in bankruptcy.

In Chapter 13 bankruptcy, past due domestic support obligations owed by a debtor are not dischargeable, unless they are paid in full over the life of the Chapter 13 plan. However, if a debt created by a separation agreement or judgment of divorce is not in the nature of support, it sometimes can be discharged in Chapter 13 without being paid in full.

For a Chapter 13 Plan to be confirmed by the Bankruptcy Court, it must pay in full to the former spouse all domestic support obligations owed by debtor at the time of the bankruptcy filing and the debtor must be current on all domestic support obligations incurred after the bankruptcy filing.

A Chapter 13 Plan, even if confirmed by the bankruptcy court, is subject to dismissal if the debtor fails to pay any post-petition or post-confirmation domestic support obligations, and a Chapter 13 discharge will not be entered by the bankruptcy court unless and until a debtor certifies that all domestic support obligations have been paid and that the debtor is current on such obligations.

The automatic stay created by a bankruptcy filing bars the commencement or continuation of most legal proceedings, but it has no effect on a proceeding to establish paternity; to establish or modify a child support order, determine child custody or visitation issues, or dissolve a marriage, except to the extent that such proceeding may seek to determine a division of marital property in which the bankruptcy estate also has an interest. In those situations, the divorce can be granted without first obtaining relief from the automatic stay, but the marital property cannot be divided without obtaining such relief.

The automatic stay also does not prevent the post-petition collection of domestic support obligations such as alimony or child support from any property belonging to the debtor, providing that the bankruptcy estate does not also have an interest in the same property; from automatic wage deduction orders created by a statute or judicial or administrative order; from the interception of debtor’s federal or state income tax refunds, or from the withholding, suspension or restriction of a debtor’s driver’s license or professional or occupational license. Therefore, Bankruptcy Court does not offer much protection for someone seeking to avoid the domestic support obligations.

Everyone deals with financial stress at one point or another during his or her life. Sometimes that financial stress is caused at least in part by money owed for child support.

And because bankruptcy is often the best option for many people who find themselves struggling with serious debt problems, it is important to understand how child support obligations are affected by bankruptcy.

Whether you owe child support, or are owed child support, you should be aware that filing bankruptcy does not discharge (forgive, cancel, wipe out) amounts owed for either current or back child support.

If you’re a parent receiving child support and the other parent files bankruptcy, the good news is child support is not dischargeable in bankruptcy.

If you’re a parent who owes child support and you file bankruptcy, you are still responsible for your child support.

Current and back child support, no matter how big or small, is not eligible for discharge in bankruptcy – ever.

If you’re a parent who is having trouble keeping up with your child support payments because of all of your other bills, filing bankruptcy could very well help you. You see, by filing for bankruptcy, you may be able to get rid of a lot of your other debts (if you file Chapter 7 bankruptcy) or at least lower the amounts you have to pay back (if you file for Chapter 13 bankruptcy), thereby freeing up money that you can put toward your child support.

And if you are behind in child support payments, you can get current by paying the amount you are behind over a 3 to 5 year period in a Chapter 13 bankruptcy.

If you’re struggling with child support payments and would like to know more about how bankruptcy may be able to help you, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you as quickly as I can. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.

If you have serious debt problems, you’re probably also stressed out most of the time. And not sleeping well. And if you’re married, you and your spouse are probably arguing with one another about money or the lack of it.

Financial problems are one of the leading causes of marital difficulty and divorce in Oklahoma today. And many times, divorce and bankruptcy go hand-in-hand.

Just think for a moment. If you are having major problems paying your bills now, think what it will be like after you get a divorce. Your household income is going to shrink when your spouse moves out. You’ll have to cover all of your monthly living expenses on just your income alone. How are you going to do that?

If you think that things won’t be so bad because you won’t be responsible for all of the marital debt, you have another think coming.

You see, if you and your spouse have acquired joint debt during your marriage, whether it be a home loan, car loan, or credit card, both of you are going to be legally responsible for that debt even if you get a divorce. Really.

Oh sure, your divorce decree will divide up the debts, assigning responsibility for some to you and some to your spouse. But understand this. Your divorce settlement is only between you and your ex-spouse. It doesn’t bind your creditors who can collect the debt from either one of you. This means if your ex-spouse doesn’t pay his or her share of the debts, the creditor can come after you for payment. And they will too.

Also what if your spouse files for bankruptcy after the divorce? If that happens, you can be sure that all of your creditors will be contacting you for payment. And if you can’t pay, then your spouse’s bankruptcy may just cause you to have to file bankruptcy for yourself. Unless you don’t mind being sued and having your paycheck garnished.

For those reasons, it may make more sense for you and your spouse to talk to a bankruptcy lawyer before you get divorced. At least that way you can get some good advice regarding the pros and cons of filing bankruptcy together first and then filling for divorce OR filing for divorce first and then filing individual bankruptcy cases.

If you are contemplating divorce in Oklahoma and would like to know more about how bankruptcy may be able to help you, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you as quickly as I can. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.