Bankruptcy and Domestic Relations Obligations
Domestic Support Obligation (DSO) is 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.
For those in debt and struggling to pay child support or spousal maintenance, they may be wondering if filing for bankruptcy allows them a get-out-jail free card. After all, when you file for Chapter 7 bankruptcy, the automatic stay stops most creditors from collecting your debts. However, child support and spousal maintenance debt are exceptions.
In Chapter 7 bankruptcy, any property you acquire after your filing date is not considered property of the bankruptcy estate. Since your post-bankruptcy earnings are not property of the estate, child support creditors are free to go after them. However, if you inherit any money within 6 months of filing, that property is considered part of assets that belong to the bankruptcy estate
Child support and spousal maintenance debt are considered a priority debt; priority debts cannot be discharged in bankruptcy. Filing for Chapter 7 bankruptcy doesn’t eliminate one’s responsibility of paying current and future child support or spousal maintenance.
Child support and spousal maintenance debt also gets paid before general unsecured debts like medical bills, credit card debt, and even tax obligations. In fact, filing for Chapter 7 bankruptcy can help a child support creditor collect past due payments without having to initiate separate legal action. However, this may involve risks such as the chapter 7 trustee attempting to sell exempt assets. It’s recommended you speak with a bankruptcy lawyer.
How Bankruptcy Can Help
An attorney may a recommend that an individual struggling with a substantial amount of debt and paying child support file for bankruptcy. Filing for bankruptcy can wipe out other debts and, therefore, free you to pay your child support.
Jake owes $3,000 back in child support and $10,000 in credit card debt. He files for Chapter 7 bankruptcy and his nonexempt property is liquidated to $2,000. This money, after the trustee’s administrative expenses, will go directly to his child support debt. So, when his credit card debt is wiped out, he will only owe $1,000 plus any accruing obligation if unpaid.
Don’t go through filing for bankruptcy alone. Hire an expert bankruptcy attorney who knows your rights and will fight to get you the best case results. Contact the Law Office of Larry Karandreas today.