What You Should Know About Discharging Domestic Debts in Bankruptcy

What You Should Know About Discharging Domestic Debts in Bankruptcy - AndersenLawPCWhen you file a Chapter 7 or Chapter 13 bankruptcy, many of your debts will be discharged, meaning you will no longer be liable to pay them. However, certain types of domestic debts are non-dischargeable, so filing for bankruptcy will not get rid of your liability to pay those debts. Below is a breakdown of how the different types of bankruptcy can affect your domestic debts.

Chapter 7

A Chapter 7 bankruptcy, known as a “wipe-out” bankruptcy, is the most common type of bankruptcy filed. You give up any non-exempt assets, and then most types of debts are discharged. However, certain debts are non-dischargeable in a Chapter 7 bankruptcy.

All domestic support obligations, as well as any debts owed to a spouse, former spouse, or child incurred during a divorce or other domestic court order, are non-dischargeable in a Chapter 7 bankruptcy. Therefore, if you owe maintenance or child support, or if you owe other debt to your spouse or child based on a domestic court order, you would remain liable to pay those debts even after a Chapter 7 discharge.

 

Chapter 13

A Chapter 13 bankruptcy is a payment plan bankruptcy, spanning three to five years, to pay off some or all of the debt you owe. Domestic support orders remain non-dischargeable in a Chapter 13 bankruptcy. However, other debts owed to a spouse, former spouse, or child, incurred during a divorce or other domestic court order, are dischargeable in a Chapter 13 bankruptcy. Therefore, if you have a property division that requires you to pay your spouse’s debts, for example, your liability could be discharged in a Chapter 13 bankruptcy.

However, if your separation agreement included language that, for example, maintenance was waived “in light of the property division,” a court could find that the property division was essentially a “support order,” thus rendering it non-dischargeable. Clearly, these issues are case-specific.

The ability to discharge domestic debts is dependent on the specific facts of your case. Courts will consider the language of your separation agreement and the intent of the parties to determine if a debt is a domestic support order. If you would like more information, please contact Andersen Law PC at 720-922-3880 or email beth@andersenlawpc.com.

By: Kameryn McCollough

Image: StockUmlimited