Alimony payments can easily become overwhelming, especially if your own financial situation is not very stable after a divorce. If you can't keep up with your court-ordered payments, bankruptcy might seem like a way out of the mess. After all, bankruptcy is designed to reduce or eliminate debt and get you back on track. However, bankruptcy only offers very limited protection from an alimony debt.
There are two different types of bankruptcy: Chapter 7 and Chapter 13. Generally speaking, alimony payments are nondischargeable under either chapter, meaning that they remain in place even if you file for bankruptcy. However, there are a few exceptions to this rule. If your ex assigns her alimony rights to a third party, your obligation to the third party may be dischargeable in bankruptcy. For instance, if your ex assigns her alimony rights to a parent, who then agrees to collect alimony from you on your ex's behalf and pay her the amount of the alimony every month, the bankruptcy court may allow you to discharge this debt.
Alimony and Support
Sometimes a divorce decree describes an obligation as alimony even though it isn't a support payment. In a Chapter 7 bankruptcy, this type of alimony remains nondischargeable. In a Chapter 13 bankruptcy, only payments the court considers “in the nature of support” are nondischargeable. For example, if you agreed to pay off one of your ex's credit cards, and the divorce decree describes this as an alimony agreement, the bankruptcy court may decide this debt isn't actually alimony for purposes of bankruptcy law. In a case like this, the debt might be dischargeable.
When you file for bankruptcy, the court orders an automatic stay on any debt-collection attempts. The stay temporarily prevents creditors from contacting you to attempt to enforce the debt. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the stay no longer applies to current alimony or child support payments. However, the stay does apply to past-due alimony payments, so your ex would have to wait to sue you for back alimony until after the end of the stay.
In a Chapter 7 bankruptcy, you finish the process with no remaining debts except for those which are nondischargeable. In a Chapter 13 bankruptcy, you pay all of your debts off on a schedule mandated by the court. Some of your debts must be paid in full, while others receive only partial payment. Chapter 7 bankruptcy offers no protection from alimony payments, but Chapter 13 can help you catch up on past-due alimony. If your Chapter 13 plan includes a commitment to pay all your future alimony payments on time, you may be able to pay off your back alimony in a series of payments. Any alimony determined by the court to be “in the nature of support” must be fully paid off by the time you come out of Chapter 13.
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