Child support, spousal support, and any other “domestic support obligation” (DSO), as defined by the Bankruptcy Code, are treated differently in a bankruptcy case from most other types of debt. DSOs have the highest priority for payment of any unsecured claim. 11 U.S.C. § 507(a)(1). They are excepted from discharge. Id. at § 523(a)(5). Property claimed as exempt under bankruptcy law could still be liable for DSO debts. Id. at § 522(c)(1). The bankruptcy trustee has additional duties when a creditor files a claim for amounts owed under a DSO.
The Bankruptcy Code broadly defines a DSO as any debt “owed to or recoverable by” a debtor’s spouse, ex-spouse, child, child’s parent or guardian, or governmental agency that is “in the nature of alimony, maintenance, or support,” and that is part of a court order or court-approved agreement. 11 U.S.C. § 101(14A). This includes orders for child support and spousal support under California law. See Cal. Fam. Code §§ 4000 et seq., 4330 et seq.
Courts around the country have found that other debts may meet the Bankruptcy Code’s definition of a DRO. These include an award of attorney’s fees in a proceeding for a modification of child support, In re Johnson, 445 B.R. 50 (Bankr. D. Mass. 2011); a duty to make mortgage payments on a former spouse’s residence, In re Westerfield, 403 B.R. 545 (Bankr. E.D. Tenn. 2009); and juvenile detention costs payable by a parent under state law, In re Rivera, 511 B.R. 643 (BAP 9th Cir. 2014). Courts found that each of these debts was excepted from discharge under § 523(a)(5). A monetary award that was part of the property division in a pre-bankruptcy divorce decree, however, was not a DRO, and therefore it was discharged at the end of the ex-husband’s Chapter 13 case. In re Mooney, 532 B.R. 313 (Bankr. D. Id. 2015).
The automatic stay takes effect at the moment a debtor files a bankruptcy petition. Certain proceedings are not subject to the automatic stay, meaning that people may continue to prosecute a claim against the debtor, or they may file a new claim. The automatic stay does not apply to actions “for the establishment or modification” of a DSO order, for collection on a DSO from non-estate property, or for court- or agency-ordered income withholding to pay a DSO. 11 U.S.C. §§ 362(b)(2)(A)(ii), (b)(2)(B), (b)(2)(C). However, one is able to set up a repayment schedule of their delinquent child support payment(s) via a Chapter 13. Here, a Chapter 13 can be used to pay back any delinquent or back-child support over the duration of the Chapter 13 plan, which can be anywhere from 36 to 60 month. Taking this approach will also stop any penalties from being added to the back child support total.
A bankruptcy trustee is required to give notice to a creditor that makes a DSO claim, advising them of their right to pursue claims through the relevant state child support enforcement agency. 11 U.S.C. §§ 704(a)(10), (c). Trustees are generally responsible for responding to a debtor’s exemption claims, but some courts have held that a trustee may not object to an exemption solely because the allegedly exempt asset could be liable for a DSO under § 522(c)(1). See In re Ruppel, 368 B.R. 42 (Bankr. D. Ore. 2007), In re Vandeventer, 368 B.R. 50 (Bankr. C.D. Ill. 2007).
Bankruptcy attorney Devin Sawdayi helps Los Angeles individuals and families use the Chapter 7 and Chapter 13 bankruptcy processes to repair and rebuild their finances with respect and dignity. To schedule a free, confidential consultation to see how we can help you, contact us today online, at (310) 475-9399, or at (800) 474-6050.
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Credit Card Debt May be Dischargeable in a Chapter 7 Bankruptcy, but a Court Order for Payment of Credit Card Debt to a Former Spouse is Not, Los Angeles Bankruptcy Lawyer Blawg, November 1, 2013
Court Addresses Dischargeability of Debts Resulting from “Willful and Malicious Injury” by the Debtor, Los Angeles Bankruptcy Lawyer Blawg, October 3, 2013
Child Support and Spousal Maintenance Obligations Are Not Dischargeable in Bankruptcy, Los Angeles Bankruptcy Lawyer Blawg, August 12, 2013