Everything You Need to Know About Spousal Maintenance and Bankruptcy
Both spousal maintenance following a divorce and filing for bankruptcy are understandably life-altering events. With the bankruptcy, an automatic stay is issues, payment plans are written up, and any of your creditors are given notice about your new status. Some debts will disappear altogether. But going through a divorce at the same time can make spousal maintenance a complicated issue.
Bankruptcy is a bumpy road to getting rid of debt and has numerous repercussions to your finances. While many types of debts may be eliminated, partially or fully, it also depends on the type of bankruptcy you choose. However, some sorts of debts don’t go away that easily. These include child support, many taxes, student loans, and spousal maintenance.
Section 523 of the U.S. Bankruptcy code states that individual debtor cannot discharge their domestic support obligations. This includes any debts owed to your spouse, ex-spouse, or child, child’s parent, or relative responsible for the child. That means it includes both maintenance and child support. In most cases, these financial obligations are the result of a separation agreement, property settlement agreement, or a divorce decree.
Exception to Section 523
There are two exceptions to the rule above that allow a spouse to discharge their spousal maintenance requirements after filing for a bankruptcy. These can be confusing and you may want to speak with Palatine maintenance attorneys to be sure you qualify.
- If the divorce required an obligation to the spouse as alimony but it is not actual alimony, it may be possible to discharge. As an example, consider a divorce decree where the paying partner is required to pay a specific company for a marital debt and that is considered alimony. This might have the ability to be discharged as it is not domestic support.
- In the case of a third party involved in alimony arrangements, the obligation can be discharged in bankruptcy. This could be if the receiving spouse has another party collect the payments, in this case it is possible to discharge the alimony.
Avoiding Alimony Through Bankruptcy
Choosing to file for bankruptcy to avoid alimony payments is not a good idea. In most cases, you will not be exempt from these obligations. However, it’s best to speak with Palatine maintenance attorneys to be sure of what your situation is.
If you want more information about how to file for bankruptcy and how it might affect any maintenance orders, you can speak with the professionals at the Law Office of Fedor Kozlov, P.C. You can reach the office at 847-380-5193 to request a free consultation.