Family Law Since Bankruptcy “Reform”

nesting dollsThe 2005  amendments to the  Bankruptcy Code accord lots of ink to claims against the person filing bankruptcy under family law.

Family support

The priority for payment of support claims from the bankruptcy estate was raised to number one.

That put family support ahead of payment to the trustee and his professionals.  That, in turn, raised a question of what incentive is there for trustees to try to collect funds to pay a claim that gets paid ahead of them.

A new definition was added to the code for “domestic support obligations“.  The definition of a priority support claim is expanded to cover claims held by others such as government entities who supported family members.

Chapter 13 debtors must repeatedly prove that they are current on post-filing support to move forward with their case.  Fall behind after filing bankruptcy and a Chapter 13 case is subject to dismissal.  Debtors must certify they are current on support to get a discharge.

Non support debts

After 2005, amended §523(a)(15) now makes all debts to a spouse arising in divorce proceedings non dischargeable in Chapter 7.  The previous  “weighing of the hardships” test for dischargeability was eliminated.

The most common of those debts incurred in connection with a divorce is an obligation to hold the other spouse harmless from creditors holding debts assigned to the bankruptcy debtor for payment.

As a result, obligations to indemnify the other spouse with respect to debts of the marriage, or to make payments to equalize the division of property, will survive a Chapter 7 discharge. They will remain dischargeable in Chapter 13.

Read more

Overview of family law issues in bankruptcy

Child support claims when payor files bankruptcy

Chapter 13 as means to catch up on delinquent support

How bankruptcy works

Image courtesy of Flickr and Fletcherjcm

About the Author
Northern California bankruptcy lawyer Cathy is a 30+ year veteran of bankruptcy practice in the Silicon Valley. She is known for energetic representation of clients and her command of bankruptcy law.