If you are considering filing for bankruptcy to avoid paying your spousal support, you might need to think again. Like student loan debt, spousal support cannot be discharged in bankruptcy proceedings.
Bankruptcy Will Not Save You From Spousal Support Payments
Under United States Bankruptcy Code (Title 11 of the United States Code) Section 523 [a] discharge under Section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from “domestic support obligations.”
“Domestic support obligation” means any debt (including interest) owed to or recoverable by a spouse, former spouse, or child of the debtor, by the child’s parent, legal guardian, or responsible relative, or by a governmental unit, such as alimony, maintenance, or support (including assistance provided by a governmental unit) under a separation agreement, divorce decree, or property settlement agreement, an order of a court of record, or a determination made by a governmental unit. Essentially, if you are paying spousal support, you cannot discharge that payment in bankruptcy.
Exceptions
While spousal support cannot be discharged, there are always exceptions:
If a divorce agreement specifies an obligation to a spouse is alimony, but the obligation is not actually alimony, the obligation can be discharged in bankruptcy. An example of this: a divorce agreement states a wife is to pay a marital debt to Corporation A, and also specifies the payment of the debt shall be treated as “alimony,” the wife may be able to discharge that “non-alimony” debt in bankruptcy, even though the divorce agreement (wrongly) calls his payment of the debt “alimony.” In this case, the alimony would be considered wrongly named.
Sometimes an ex-spouse may be able to discharge an alimony obligation if that obligation has been assigned to a third party. An example of this: Joe and Jane Doe divorce. Joe is ordered to pay Jane an alimony of $500.00 per month. Joe does not pay the alimony and Jane, who needs the money, assigns the right to collect alimony payments to her father, who then gives Jane the $500.00 per month in return for the assignment. Jane’s father now legally owns the right to collect the alimony from Joe. But if Joe files for bankruptcy, the alimony obligation can be discharged because it has been legally assigned to Jane’s father.
Managing Other Debt
One other thing that might help if you are struggling to pay alimony is to find a way to manage your other debt through debt consolidation. Streamlining debts can help to free yourself from financial burden while lowering costs. But you’ll want to understand just what debt consolidation is so that you can decide if it’s for you. If you’re able to pay off your debts within 6 months to a year, you might just consider being really strict. If you look at your debt and see years and years of potentially impossible saving, then you might consider debt consolidation.
Debt Consolidation Companies
A lot of times willpower is not enough to help debtors out of the hole. It’s important that you analyze your spending habits. Going out to dinner every night for a delicious but extravagant meal will not help you pay down your $33,000 Visa debt. You’re going to need to make some changes. But if you have made those changes and you still are not reaping the rewards of your new debt habits, then you might want to seek the help of an expert.
That’s exactly where a debt consolidation company comes in. These companies are kind of like your best friend that stops you from eating that fourth chocolate chip cookie. Debt consolidation companies are there to “save you from yourself” and help you make the right financial moves before your “inner cookie monster” takes over.
Here’s what a debt consolidation (a.k.a. debt management or credit counseling) does:
- Closes credit accounts so you cannot use them.
- Sets up an automated monthly payment based on your budget that gets distributed it to your creditors.
- In some cases, they can negotiate lower APRs or reduced late fees with your creditors
Considering Debt Consolidation
Debt consolidation can be helpful to anyone: whether you’re considering bankruptcy, or if you are just trying to get a handle on your finances.
What Is Debt Consolidation?
Debt consolidation means that all of your smaller loans get paid off with one large loan. So you essentially get one lump sum to pay off your smaller loans so that you only have one monthly payment rather than several monthly payments. The their behind this is one payment is easier to manage than several. And the main goal is it lower the interest rate and monthly payments while paying off your debt in a quicker amount of time.
Debt Settlement
It’s important to note that debt consolidation is not the same as debt settlement. Debt consolidation allows you to pay your debts in full without causing negative consequences to your credit. Debt settlement is the process of paying off debt to a creditor once a mutually agreed to sum is reached. This sum is usually less than what is owed. Typically, only unsecured debt (for example, credit cards and medical bills), is eligible for debt settlement. Debt settlement is often considered a risky process.
Overview of What Can Bankruptcy Do to Help
If you do not meet the undue hardship criteria for student loan debt, bankruptcy can still help you in important ways. Mostly, you will be filing in order to control your other forms of debt. Filing for Chapter 13 bankruptcy can restructure your student loans along with other debt into a manageable three- to five-year payment plan.
Filing for Chapter 7 bankruptcy can eliminate your other debts such as credit card and medical bills, giving you some breathing room, so you can better manage your student loan debt.
Every situation is different. Our bankruptcy lawyers will work with you personally to craft a debt relief strategy that meets your unique goals and helps you get your student loan debt under control.
California Bankruptcy Lawyers Providing Trusted Guidance
When bankruptcy and divorce or another family law issue occur at the same time, the intersection of the laws in each area creates a number of questions, such as:
- Can my spouse and I jointly file for bankruptcy while we are going through a divorce?
- How are joint debts separated if I file for bankruptcy and my spouse does not?
- If I file for bankruptcy, do I still need to pay child support?
- Are spousal support obligations discharged in bankruptcy?
- What happens if I lose my job while I am in Chapter 13 bankruptcy?
- My home is facing foreclosure. Will we lose our equity in our divorce?
For these and other questions, it is important that you get solid answers from someone who knows bankruptcy inside and out. At RHM LAW LLP, we understand all aspects of Chapter 7 bankruptcy and Chapter 13 bankruptcy. We welcome the opportunity to meet with you and discuss your particular situation.
If financial distress is causing arguments, there is a solution to your financial hardship! Chapter 7 or Chapter 13 bankruptcy could give you a fresh start, save your house, your car, and, potentially, your marriage.
Working with RHM LAW LLP
Are you overwhelmed by student loan debt and looking for financial relief? While in most cases, student loans cannot be discharged in bankruptcy, the attorneys at RHM LAW LLP, can help you explore debt relief options that can make your situation much easier to bear. We are experienced bankruptcy lawyers who have helped numerous clients throughout the Los Angeles area achieve their debt relief goals.