Divorce creates a common question about debt posed to our office which is whether obligations resulting from a divorce are dischargeable in Bankruptcy. The answer is, “it depends” or “no”, depending on the type of divorce obligation you have and also what Chapter of Bankruptcy relief you are eligible for.
Divorce obligations can be broken into two categories. There are the “Domestic Support” obligations and the “Property Settlement” obligations. There are specific criteria in the Bankruptcy Code used to determine what type of obligation is involved. Noteworthy, the Family Court’s classification of the obligation you are questioning will not necessarily be that of the Bankruptcy Court. Attorney Jack Pitts will be able to decipher what type of domestic obligation you really have and advise you accordingly.
Child support or alimony are the commonly known Domestic Support obligations. The Bankruptcy Code clearly states that regardless of what type of Bankruptcy you file, that these support obligations are never Discharged. Even better news for the ex-spouse that is owed support and not filing, is that your chances of collecting that debt may have increased significantly if a Chapter 13 is filed by the Debtor. This is because the Debtor will need to propose a Chapter 13 Plan to the creditor ex-spouse that pays them in full during the life of the Plan.
Divorce created obligations that are not domestic support obligations in most cases are still not dischargeable in the debtor ex-spouse files for Chapter 7 relief. Examples of “Property Settlement” obligations would be the responsibility for a marital debt, or, obligation to pay a certain sum of money to the other upon the happening of an event like the sale of what once was the marital domicile, to suggest a couple. You can usually find these types of obligations in your property settlement agreement that details the division of marital assets and liabilities.
If though, a debtor files for Chapter 13 relief, they can in fact discharge “Property Settlement” obligations, if the debt is: owed to a spouse, former spouse, or child of the debtor;
is not a the debt found to be a Domestic Support obligation; and must have been created during the Divorce. This is great for the Debtor, since you can now pay that obligation off in a set period of time and in an amount that you can afford. At the end of the Chapter 13 Plan you will be relieved of any further obligation even if you only were able to pay a portion of same.
Consulting with an experienced Rhode Island and Massachusetts’s Bankruptcy law firm, such as Pitts & Burns, can help you determine if you have a domestic obligation that can be discharged in bankruptcy, or, for the creditor ex-spouse, if you have an argument to stop marital obligations from being Discharged.