Family Court issues in Bankruptcy Court: Domestic Support Obligations

Family Court issues in Bankruptcy Court: Domestic Support Obligations

Posted By Hall & Hall Attorneys at Law || 24-Jun-2013

Parties involved in litigation in the Family Court may also find themselves in need of filing for relief in the United States Bankruptcy Court. Additionally, a person may be paying child support and/or alimony and need to file for bankruptcy relief. The issues such people may encounter include, but are not limited to, what is Domestic Support Obligation as defined by the United States Bankruptcy Code, whether the Family Court's enforcement of a Domestic Support Obligation is stayed by the Bankruptcy Court, and whether a Domestic Support Obligation is dischargeable in your bankruptcy case.

11 U.S.C. § 101(14A) defines a Domestic Support Obligation as follows:

The term "domestic support obligation" means a debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title, that is—

(A) owed to or recoverable by—

(i) a spouse, former spouse, or child of the debtor or such child's parent, legal guardian, or responsible relative; or

(ii) a governmental unit;

(B) in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child's parent, without regard to whether such debt is expressly so designated;

(C) established or subject to establishment before, on, or after the date of the order for relief in a case under this title, by reason of applicable provisions of—

(i) a separation agreement, divorce decree, or property settlement agreement;

(ii) an order of a court of record; or

(iii) a determination made in accordance with applicable nonbankruptcy law by a governmental unit; and

(D) not assigned to a nongovernmental entity, unless that obligation is assigned voluntarily by the spouse, former spouse, child of the debtor, or such child's parent, legal guardian, or responsible relative for the purpose of collecting the debt.

11 U.S.C. § 101(14A).

So, a Domestic Support Obligation is a debt owed to a child, parent, spouse or former spouse, now or later. This debt can be for alimony, maintenance or support pursuant to a court order such as a divorce decree, or an agreement such as separation or property agreement.

11 U.S.C. 362(b)(2) provides that the following are not stayed by the filing for bankruptcy relief:

(A) of the commencement or continuation of a civil action or proceeding—

(i) for the establishment of paternity;

(ii) for the establishment or modification of an order for domestic support obligations;

(iii) concerning child custody or visitation;

(iv) for the dissolution of a marriage, except to the extent that such proceeding seeks to determine the division of property that is property of the estate; or

(v) regarding domestic violence;

(B) of the collection of a domestic support obligation from property that is not property of the estate;

(C) with respect to the withholding of income that is property of the estate or property of the debtor for payment of a domestic support obligation under a judicial or administrative order or a statute.

11 U.S.C. 362(b)(2).

Issues with the automatic stay involving pending family court matters can be resolved with a consent order issued by the Bankruptcy Court. However, additional relief from the stay will be required for enforcement of that obligation against property of the bankruptcy estate or is subject to further review by the Bankruptcy Court.

Once an obligation is determined to be a Domestic Support Obligation, it receives preferred treatment and the highest priority in payment, under 11 U.S.C. § 507(a)(1). Domestic Support Obligations are not dischargeable in a Chapter 7 or individual Chapter 11 bankruptcy case. See 11 U.S.C. § 523(a)(5) and (15). It is a condition of confirmation that a Domestic Support Obligation be paid in full. 11 U.S.C. § 1307(c)(11) provides that failure to pay a Domestic Support Obligation due post-petition is grounds for dismissal of a case.

In a Chapter 13 Case, Domestic Support Obligations survive the bankruptcy and are not discharged, while other marital debts are treated as unsecured claims. See 11 U.S.C. § 1328(a). For example, whether attorney's fees awarded in Family Court litigation are dischargeable depends on the nature of the debt. If the litigation concerns a child or other Domestic Support Obligations, the attorney fees are nondischargeable in a Chapter 13 case. However, if the litigation was just to obtain a divorce or the distribution of marital assets and debts, the attorney's fee award is not a Domestic Support Obligation will be discharged in a Chapter 13 case.

The attorneys at Hall & Hall Attorneys at Law can assist you in with your issues involvingFamily Court matters and issues in the United States Bankruptcy Court. Please contact our office to assist you in these legal matters. Our office also provides services to residents of South Carolina, involved in criminal defense, real estate, probate, wills, and personal injury.

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