The Bankruptcy Code provides special protection for parties’ owed domestic support obligations, such as child support, alimony, and spousal maintenance. In its present form, the Bankruptcy Code provides that domestic support obligations cannot be discharged in a Chapter 7 case and receive priority status in Chapter 13 bankruptcy plan. This priority status guarantees that domestic support obligations are among the first debts to be paid, and creditors owed this type of debt are entitled to be paid in full in a Chapter 13 plan.
I would like to take a moment and discuss an issue that affects those people who are owed a domestic support obligation by someone who has filed Chapter 13 bankruptcy. In this article, I’m going to refer to the person owed the debt as the “creditor” and the person who owes the debt as the “debtor.” As discussed above, the creditor is entitled to be paid in full in the Chapter 13 plan. However, it is not always wise to require the debtor to repay the entire debt in the bankruptcy. In order for a Chapter 13 bankruptcy case to be successful, the debtor has to prove that they have enough income to pay their household expenses plus their Chapter 13 plan payment. If a debtor cannot show that their income is sufficient to pay these expenses, then the bankruptcy court will eventually dismiss their case depriving the debtor from the relief offered by a discharge.
In some instances, a debtor may owe so much in domestic support obligations, that they have no hope of making a Chapter 13 plan payment and still paying their other bills. In these cases, if the debtor is required to pay their entire domestic support obligation, they will not be able to continue in bankruptcy. The creditor should consider how the debtor’s other debts affect their financial situation. If a debtor has substantial credit card debt, medical bills, or other debts, they may be behind on their child support, alimony, or spousal maintenance because they are financially overwhelmed by these other debts. In this situation, the creditor should consider allowing the debtor to pay less than their entire debt in the Chapter 13 plan. This will allow the creditor to receive partial repayment of what they are owed and allow the debtor to receive a discharge of their other debts. Once these debts are discharged, the debtor will be in a better position to repay the remainder of the domestic support obligation. Don’t forget, the domestic support obligation is not dischargeable, so allowing partial repayment in the Chapter 13 plan doesn’t mean that the creditor will not be paid in full eventually. Sometimes accepting less than full payment of a domestic support obligation in a bankruptcy plan is the best way for a creditor to ensure that they will be paid.
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