Dealing with Debts Owed to Ex-Spouses through Bankruptcy

Chapter 13 bankruptcy — the three-to-five-year “adjustment of debts” — can help you with an ex-spouse who is unhappy with you for not paying a debt in the following ways:

• It can discharge (legally write off forever) nonsupport “property settlement” obligations owed to your ex-spouse through your divorce decree.
• It can give you time to catch up on child support, while stopping the aggressive collection tactics otherwise available to your ex-spouse and any support enforcement agency.

Discharging Nonsupport Divorce Debts

Debts arising from divorce decrees can create two categories of obligations for you:

1. those “in the nature of alimony, maintenance, or support,” (even if not specifically called that in the decree), and
2. all others (called “property settlement” obligations).

The first category includes child and spousal support, but can also include obligations to pay ongoing expenses that are “in the nature of” support, such as health insurance premiums, a portion of ongoing medical expenses and a child’s schooling. These can never be discharged in bankruptcy, through either Chapter 7 or 13.

The second category includes all financial obligations created by the divorce decree not “in the nature of” support. These are called “property settlement” obligations because their purpose is to settle the division of marital property. But “property” includes both assets and debts. So, as to marital debts, a divorce decree often includes provisions specifying which of the two spouses is to pay those debts.

These “property settlement” debts include those 1) jointly owed by both ex-spouses to a creditor, which the decree requires one of them to pay; 2) owed by only one of the ex-spouses to the creditor, with the decree requiring either one or the other to pay it; and 3) owed by one ex-spouse to the other, often to make up for that person receiving more than his or her share of a marital asset or debt.

Although Chapter 13 bankruptcy cannot discharge obligations “in the nature of” support, it CAN discharge part or all of those obligations that are in the second category — the “property settlement” obligations, including the three different forms listed in the above paragraph. So if you owe a significant amount of this kind of debt from your divorce, Chapter 13 may well be the way to go.

Getting Time to Catch Up on Back Support Payments

Unlike with Chapter 7, the filing of a Chapter 13 case stops all the aggressive ways an ex-spouse or support enforcement agency can collect on support obligations. But for this protection to last more than just a few days, you must meet a number of strict conditions:

• Your Chapter 13 plan must provide for catching up on all the back support during the life of the plan.
• You must make your monthly plan payments on time, demonstrating that the plan is feasible and that the back support will be paid.
• Your budget must show that you will be able to start (or continue) making the regular monthly divorce court-ordered support payments, AND then you must actually pay those on time. These payments start with the first one that is legally due immediately after your Chapter 13 case is filed, and then every month thereafter.
• At the end of your Chapter 13 case you must certify that you are current on your ongoing support payments, or else you cannot complete your case and get a discharge of your remaining debts.

Let me show you how Chapter 7 and Chapter 13 bankruptcy can help you solve your financial problems, with your vehicle loan(s) and with everything else. If you are in the Rockwall, Heath, Greenville, Lavon, Wylie, Mesquite, Royse City, Sachse or Rowlett, Texas, contact the Law Office of Carrie Weir. The initial consultation is free. Please call 972-772-3083 or use this form .