Family Law Can Turn Dischargeable Debts Into Non Dischargeable Debts
Very often, divorce and bankruptcy go hand in hand. Yet, people who are filing for, or thinking about filing for divorce, rarely give thought to having a bankruptcy consultation before their divorce, so they understand how bankruptcy may affect them after their divorce.
Support and Bankruptcy
One aspect of divorce that can be affected by bankruptcy is support—that is, support of either an ex spouse or child, through property division, alimony, or child support.
Support of any kind that is awarded in a divorce proceeding is almost always considered non-dischargeable in bankruptcy. This rule applies whether the support was ordered by a court, or whether you agreed in a settlement agreement with your ex-spouse to pay support (although non-dischargeable in bankruptcy, at least you may have additional monthly income to pay these support expenses once your other debts are discharged in bankruptcy).
“Hidden” Support Obligations
When we think of family law support, we think of alimony and child support. But the bankruptcy definition of domestic support is much broader. It includes (and thus makes non-dischargeable) anything that is intended to be support to the other spouse or the kids, whether or not labeled as support in your divorce agreement or not.
Let’s say your ex husband alleges that you sold marital property but you did not give him the half of the proceeds he was entitled to. He is a creditor in your bankruptcy.
You may say that obligation is not support—it’s division of property, and thus, the debt is dischargeable. However, a bankruptcy court could look at that obligation and say its intent was to support your ex husband, and as such, the debt is not dischargeable.
Even payments to third parties may transform from dischargeable to non-dischargeable. If you agree to make the car payment for your ex, and you stop paying, that car payment may now be non-dischargeable, because the promise to pay it was an element of support to your former spouse in your divorce.
Sometimes people agree to help children, outside of the base child support payment. They may agree to pay for college, tutoring, or extracurricular expenses. Even though that money is not technically labeled as child support, and may not be specifically defined as such in your divorce agreement or court order, a bankruptcy court would likely see that as support, and make that obligation non-dischargeable, just as the base child support obligation is non dischargeable.
Promises to pay the other side’s attorneys fees in a divorce can end up being labeled as support as well.
Planning Ahead Can Help
You can take steps to label certain obligations in your divorce as not being in the nature of support. Although you can’t do that with everything, if there are certain payments or division of property that you want to try to ensure are dischargeable, you may want to include that kind of language in your divorce or marital settlement agreements, if possible.
If you’re thinking about bankruptcy, get a consultation now, so you can plan ahead. Contact the Boca Raton bankruptcy attorneys at the Law Offices of Stephen Orchard at 561-455-7961.