Many debtors wonder how child support and alimony factor into a bankruptcy filing. People often ask, “Can child support or alimony be discharged in a bankruptcy?” The answer is no. Child support and alimony are non-dischargeable debts. This means these debts cannot be discharged in either a Chapter 7 case or a Chapter 13 case.
However, these debts are treated differently in Chapter 7 and Chapter 13 cases. In a Chapter 7 case, the debtor’s general unsecured debt (like credit cards and medical bills) are eliminated or discharged, but all of one’s child support and alimony debt (including past due amounts and ongoing payments) will survive the bankruptcy. This means the debtor will still owe these debts in full once the Chapter 7 case is discharged and closed. The party who is owed child support does not have to file anything in the debtor’s bankruptcy case in order for child support and alimony to survive the bankruptcy. These obligations automatically survive the bankruptcy discharge. Typically, after the case is discharged the debtor must deal with these obligations on his or her own.
In Chapter 13 cases, the debtor is required to pay a Chapter 13 plan payment to the Chapter 13 trustee. The Chapter 13 trustee receives the payment and distributes the money to creditors. In most Chapter 13 cases, the general unsecured creditors only receive payment for a small percentage of what they are owed through the Chapter 13 payment plan. However, certain unsecured debts are called “priority unsecured debts.” Priority unsecured debts need to be paid back in full through the plan. The most common priority unsecured debts include some taxes and all of one’s past due child support or alimony.
This means that the full amount of any back or past due child support and alimony due and owing on the date that the debtor files the Chapter 13 case needs to be paid back entirely through the Chapter 13 plan. This can really increase the Chapter 13 plan payment amount for a debtor. For instance, if one owes $30,000 in past due child support when he or she files the Chapter 13 case, this entire amount needs to be paid back through the plan. The maximum length of a plan is five years or sixty months. This means the debtor’s Chapter 13 trustee would have to average paying out $500 per month to the person receiving the support for each of the 60 months in order to satisfy the entire debt. This amount is in addition to all of the other debts that need to be paid through the plan. For this reason, a Chapter 13 bankruptcy may not be a viable option for those who owe a great deal in back child support and alimony.
Ongoing payments need to also be kept current throughout the entire duration of the Chapter 13 plan. At the end of the Chapter 13 case, the debtor needs to certify that he or she is current on all child support and alimony obligations, or the court may deny the debtor who owes the obligation his discharge at the end of the case. This means that if the debtor does not remain current on these support obligations, the whole three to five years of bankruptcy payments may have been made in vain. A denial of discharge means the debtor still owes all of the debtor’s creditors under the original terms of the debt contracts.