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Can I Discharge Any Debt in a Divorce Decree? [2021 Update]

Can I Discharge Any Debt in a Divorce Decree?

A typical divorce decree will spell out child support obligations and alimony and enumerate who is responsible for each debt listed. The divorce decree also divides any property between the couple. But many clients who come to us to file bankruptcy have already been divorced. Their question pertains to the court’s ruling. They’d like to know whether the amount they have been legally bound to pay can be discharged in their bankruptcy filing. 

As seasoned bankruptcy attorneys, we can help clients who find themselves in this situation. Let’s uncover the answer to this common bankruptcy question, centering our reply around chapter 7 and chapter 13 bankruptcy, the most common options for an individual in financial straits. For those whose unsecured debt exceeds standard limits, chapter 11 is also an option.

Understanding Bankruptcy and Divorce

As with any question centered around bankruptcy, the type of filing will inform the answer. Understanding the nuanced language surrounding divorce and the court’s decree is also vital. Whether an individual wishing to file for bankruptcy is already divorced, contemplating divorce, or currently involved in divorce proceedings will also affect how they view the situation and what steps they might take. 

For instance, an individual with an active bankruptcy case who then decides to file for divorce could see a drastic change in their disposable income, due to new financial obligations like alimony and child support. A repayment plan could be altered and the change in circumstances could even make them eligible for a chapter 7 instead of a chapter 13 filing. If a former spouse is now indebted to the other, the owed party could effectively become a creditor in the debtor’s bankruptcy case and their repayment rights would be protected. However if the circumstances are putting undue hardship on the debtor, it might be possible to bring a complaint and make modifications. 

For those who are undergoing divorce and anticipate that a party may file for bankruptcy, they can work with their divorce attorney to include the proper language in their decree so that their bankruptcy case is more predictable. But despite all the potential variables, one thing is for sure: regardless of the type of bankruptcy filing, alimony and child support cannot be discharged. Whether it’s called family support, child support, alimony, spousal support, or any other term, bankruptcy is not a threat to this essential payment.

Support payments may also include obligations to pay future educational expenses and health care costs, car payments, and other arrangements that support the divorced couple’s children. These are deemed binding legal obligations by the court and bankruptcy cannot dissolve them. In fact the automatic stay that keeps creditors at bay during a bankruptcy case cannot stop proceedings for custody, visitation, paternity, alternation of status, and collection of support. 

Divorce Decree and Chapter 7 Bankruptcy

Filing for bankruptcy under chapter 7 will make it very difficult for you to discharge debts owed to your ex-spouse, and here’s why. First, we’ve already established that any payments that can be construed as “support” are automatically off the table in bankruptcy court. That could mean mortgage payments or other property-related debts that directly relate to your ex-spouse’s or childrens’ welfare. Second, any debts that were specifically documented during your divorce or separation proceedings are out of bounds here too. Those two criteria combined cast a wide net and most, if not all, of the debts you are hoping to discharge could fall somewhere in its range.

So even if the debt is related to something that has no direct bearing on your ex’s material welfare, if it’s part of the divorce decree or separation agreements––e.g. credit card debt, timeshare contracts, vehicles––then it’s simply not dischargeable in a chapter 7 bankruptcy. The rules exclude all debts incurred in the course of a divorce or separation. Your court-determined financial obligations to your ex-spouse and children trump all else.

You can, of course, discuss the ins and outs of your specific situation with a bankruptcy attorney, but suffice it to say that if a major part of your reason for filing for chapter 7 bankruptcy is to discharge divorce-related debts, you’ll end up going through the bankruptcy process and still owing. It’s a good practice to consult with a chapter 7 bankruptcy lawyer first––they’ll be able to fill in any knowledge gaps and let you know of specific rules that apply to your situation.

Divorce Decree and Chapter 13 Bankruptcy

A chapter 13 bankruptcy filing can allow you to discharge debts related to your divorce decree or separation agreement, so long as they’re strictly for property that doesn’t affect your ex’s or children’s material welfare. A court will determine whether a debt falls in line with their definition of domestic support obligation (DSO) or not. But in general, debts that are within the legal definition of “property division debt” are dischargeable under a chapter 13 bankruptcy.

A lot of people who choose to come see us in hopes of filing for bankruptcy have already been divorced. In that case, dischargeable debts will be up to what the court has determined to be DSOs. But for those who are in the process of divorce or are considering it, understanding the difference between dischargeable debts in chapter 7 and chapter 13 filings can help you to determine how to proceed.

So while a home mortgage is almost always going to be determined as a DSO, credit card debt might not be. A bankruptcy attorney can fill you in on the specifics, and especially how those established rules relate to your case. Long story short, while support payments are never dischargeable in bankruptcy, property division debts resulting from a divorce decree are often dischargeable in a chapter 13 filing.

Rely on Your Ohio Bankruptcy Lawyers

Divorce is a stressful time on its own. Add financial hardship to that mix and it could become an impossible burden to bear. For many who find themselves on the other side of a divorce, thoughts may immediately turn to bankruptcy as a way to alleviate financial woes. Clearly though, so much depends on factors outside of any one individual’s control. Consult with a reliable bankruptcy attorney to learn what you can do going into a divorce to mitigate exorbitant debt. If you have further questions, or would like to schedule a free consultation with bankruptcy lawyers that hold over 50 years of combined experience, feel free to contact Bates and Hausen, LLC. We’re ready to help.

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