It's an unfortunate truth that often times 'money problems' are cited as the leading cause or contributing factor to divorce. Considering this, it's not unusual for a post-divorce bankruptcy (or two) to play a part of the life after divorce.
In dealing with bankruptcy concerns, child support becomes a critical factor for Florida law cases.
If you find yourself facing this situation with your ex-spouse, you need to be informed about how bankruptcy affects child support payments.
Often, one party files for bankruptcy under the impression that any and all financial obligation to the other party will be dischargeable in the bankruptcy. However, this is simply not the case with domestic support obligation(s). In response to the economic downturn and housing market decline, a bankruptcy law went into effect in 2005, titled 'The Bankruptcy Abuse Prevention and Consumer Protection Act' (BAPCPA ). This altered the relationship of debtors and creditors, and even altered the relationships between creditors. This new law changed many things in the bankruptcy code including how a "domestic support obligation" will be treated.
Child Support And Bankruptcy
What do you need to know about domestic support obligation as it relates to bankruptcy? First, domestic support obligation can come in many forms, such as:
- Alimony and/or child support
- Money owed to a spouse before divorce
- Financial obligation incurred during a divorce agreement
Before BAPCPA, the law stated that you could NOT discharge a child support obligation or alimony in a Chapter 7 or Chapter 13 bankruptcy, but you could discharge any money owed to a spouse (i.e., domestic support) under a divorce agreement so long as the money wasn't a part of the alimony or child support obligation. This is sometimes termed, an "equalizing payment" in the final agreement or court judgment.
Additionally, before this new law, if the ex-spouse filing for bankruptcy couldn't pay the debt or if discharging the debt would be less detrimental to the spouse receiving the funds, it could be listed and discharged depending on the final judgment of the court. All of this changed with BAPCPA.
How Will Bankruptcy Affect Child Support Payments
A Chapter 7 bankruptcy is a personal bankruptcy, offering filers a complete discharge of all eligible unsecured debts; however, child support is not eligible for discharge thanks to The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). It is understood by the United States Congress, family law and bankruptcy courts that child support payments are intended to maintain a human life and are accordingly highly prioritized and protected by the court.
Simply put, if you or your ex-spouse file a Chapter 7 (or Chapter 13) bankruptcy, the domestic support debt and child support is still obligated and the courts will not be able to discharge the debt. When the bankruptcy is over, the spouse will still owe the debt and support to the other spouse.
Bankruptcy and Child Support Modification
Keep in mind, since bankruptcy eliminates certain low-priority debts, it may make it easier for your ex-spouse to make monthly child support payments. Bankruptcy cannot change what your ex-spouse owes in child support or make modifications to the amount of payment.
With this in mind, if your ex-spouse can no longer afford the court-ordered child support payment, you may want to contact a divorce or family court lawyer to discuss your specific concerns and situation before you and your child or children experience undue financial hardship.
Seek out trustworthy legal advice about your options and understand your rights so that you can protect you and your children from ongoing stress and confusion. We're here to help you with any questions you have, or you may set up a consultation to discuss your case now.