Bankruptcy does not discharge child or spousal support. The rare exception: if the support debt is not a “domestic support obligation.”
Child and spousal support are more like criminal debts than like income taxes. On the one hand, bankruptcy simply does not discharge a criminal debt, as long as it really is a criminal, not civil, obligation. On the other hand, bankruptcy does discharge income tax debts that meet certain conditions. Bankruptcy simply does not discharge child and spousal support, IF it fits bankruptcy’s definition of support.
No Discharge of Support
Section 523 of the U.S. Bankruptcy Code lists the “Exceptions to discharge.” It includes that “A discharge under [Chapter 7] does not discharge an individual debtor from any debt—(5) for a domestic support obligation . . . “ Section 523(a)(5).
Chapter 13 says the same thing by incorporating this Chapter 7 exception to discharge in its own list of exceptions. Section 1328(a)(2).
What’s Considered Support in Bankruptcy?
So if you owe a “domestic support obligation,” you’re not getting out of it through bankruptcy. But what does that phrase mean? What does it include and what might if not include?
The Bankruptcy Code’s definition of “domestic support obligation” is 221 words long, containing 10 clauses. Section 101(14) of the Bankruptcy Code. It appears to be a broad definition, covering anything that would sensibly be considered child or spousal support. For example, the debt could be owed not just to your ex-spouse or your child, but also to a current spouse (through a separation agreement) or to the parent, legal guardian, or responsible relative of a child (based on a court order of support, even if not biologically your child). In other circumstances, to be considered support the debt does not necessarily need to be based on a court order. It can be based on a separation agreement or “a determination made in accordance with applicable nonbankruptcy law by a governmental unit.”
Yet there are some limitations. For example, support obligations are often assigned for collection to someone other than the ex-spouse or child. Usually it’s assigned to a state or county support enforcement agency—then it’s still considered support. However, a support obligation that was “assigned to a nongovernmental entity” for collection is no longer considered support in bankruptcy. That is, it isn’t “unless that obligation [was] assigned voluntarily by the spouse, former spouse, child of the debtor, or such child’s parent, legal guardian, or responsible relative for the purpose of collecting the debt.” Section 101(14)(D).
Obligations “In the Nature of” Child or Spousal Support
Sometimes a domestic relations court will call something support that really isn’t. The bankruptcy court does not have to accept what your divorce court labeled as support.
The definition of a “domestic support obligation” (that is, support) includes the requirement that it really be “in the nature of alimony, maintenance, or support” on behalf of the pertinent person. Section 101(14)(B). If it’s not, the debt may be dischargeable.
“Support” That Might Be Dischargeable in Bankruptcy
For example, a debt that’s labeled as support might not really be “in the nature” of support if it’s actually a “property settlement” obligation that’s mislabeled as spousal or child support.
A property settlement obligation involves the resolution of a marital asset or debt. For example, you may owe money to your ex-spouse in return for receiving more than your share of marital assets. Or you may owe in return for your ex-spouse taking on what had been a joint debt. If a divorce judge requires you to pay “support” for what is really a property settlement, it may be discharged in bankruptcy.
The Difference This Can Make
So if you have obligations called “support” but which are not “in the nature of support,” a Chapter 13 is worth looking into. Chapter 13 may especially be worthwhile if the debt at issue is large.
If you owe a debt labeled as support by your divorce court, most of the time it will indeed be “in the nature of” support. But not always.
You can see that the interplay between divorce law and bankruptcy can get complicated. Talk with your Louisville bankruptcy lawyer about all of your divorce obligations to get all the relief you’re entitled to.