Contrary to popular belief, bankruptcy is not just reserved for those who are “fiscally irresponsible.” Virtually anyone can encounter serious financial problems in the wake of job termination, workplace or motor vehicle accidents, lengthy illnesses or even divorce.
Fortunately, bankruptcy provides good people with the opportunity to obtain a fresh financial start in otherwise difficult times. Nevertheless, it is imperative to know the limitations of bankruptcy, meaning what is and is not dischargeable.
For example, did you know that successfully filing for bankruptcy does not terminate your responsibility for divorce-related support payments?
According to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), child support and alimony payments (both past due and future) are not dischargeable via bankruptcy.
- If you are divorced and subsequently file for bankruptcy (Chapter 7 or Chapter 13), two parties will be notified on two separate occasions: your former spouse and the Child Support Division of the Office of the Attorney General of Texas. They will be notified when you actually file for bankruptcy and when you actually receive a discharge.
- If you are behind on child support and/or alimony payments, but have few assets to sell (liquidate) to pay off your creditors, you will still have to make the necessary supports payments. In all likelihood, a payment schedule for both past due and future amounts will be set up by the bankruptcy trustee.
- If you are behind on child support and/or alimony payments, and have some assets, they will probably be sold (liquidated) and the proceeds applied to your past due payments.
- In the event you have trouble making support payments due to financial difficulties post-bankruptcy, you can always petition the local court for a modification of support payments. Be advised that you will probably need to show a substantial change in circumstances or some sort of hardship.
The following is for informational purposes only and not to be construed as legal advice. Contact a legal professional to learn more about your family law issue.
- Bankruptcy Doesn’t Absolve Spousal Support Payments (CreditCards.com)