How to Collect Child Support or Alimony After Payor Files Bankruptcy

COLLECTING CHILD SUPPORT, ALIMONY, OR OTHER DOMESTIC SUPPORT OBLIGATIONS AFTER A BANKRUPTCY PETITION IS FILED

In Chapter 13 Bankruptcy Cases

Domestic Support Obligation Creditors: If you represent a creditor to whom a DSO is owed and the debtor files Chapter 13, consider doing the following:

  • Attend the 341 Meeting of Creditors to obtain information about the debtor’s intent regarding DSO or other debts arising out of a divorce/separation owed to your client.
  • File an adversary proceeding against the debtor if there is any debt owed to your client that may not be considered a DSO under the bankruptcy code.
  • File an objection to confirmation if the Chapter 13 plan does not treat your client fairly.  For example,
    • The plan treats your client’s DSO as an unsecured, non priority claim;
    • The plan fails to treat your client’s DSO claim at all;
    • The debtor has filed bankruptcy 2 or 3 times in the past year to thwart efforts to collect his/her DSO or other similarly related obligations.
    • PRACTICE TIP:  File your objections to confirmation of the case BEFORE the date the Chapter 13 case is scheduled for confirmation.  If you wait until after confirmation, the court may order confirmation of the case the way the debtor proposed to pay your client’s claim.  In that case, any argument you may have to may be barred by res judicata.Continue to collect child support via administrative order or statute.  Ie. Income deduction order for arrears or ongoing obligation through child support services.
    • Your client is still entitled to receive post-petition payment directly from the debtor; you can file an objection to confirmation of the bankruptcy case or a motion to dismiss if the post-filing support payments are not current.
    • File a proof of claim on your client’s behalf asserting that your client is entitled to payment of domestic support obligations under a “PRIORITY” status.
    • File a motion to lift the automatic stay if you have any doubt that a proceeding involving the collection of a DSO may not fall under the 11 U.S.C. Section 362(b)(2)(B) exception to the stay.

Domestic Support Obligation Debtors:  If you represent a debtor who owes DSO and files a Chapter 13, advise your client that:

  • S/he is still obligated to pay ongoing post-filing domestic support obligations;
  • Domestic support obligations, such as child support and alimony (and any other types of obligations defined as DSO pursuant to the bankruptcy code), are not dischargeable in bankruptcy;
  • Payments of child support or other domestic support obligations via an administrative order, such as through child support services, cannot be stopped with Chapter 13.
  • S/he may be able to propose a repayment plan to the DSO creditor for arrears, and the DSO creditor will have “priority” status over other creditors.

In Chapter 7 Bankruptcy Cases:

Domestic Support Obligation Creditors: If you represent a creditor to whom a DSO is owed and the debtor files Chapter 7, consider doing the following:

  • Attend the 341 Meeting of Creditors to obtain information about the debtor’s intent regarding DSO or other debts arising out of a divorce/separation owed to your client.
  • File an adversary proceeding against the debtor if there is any debt owed to your client that may not be considered a DSO under the bankruptcy code.
  • File a motion to lift the automatic stay if you have any doubt that a proceeding involving the collection of a DSO or something similar may not fall under the 11 U.S.C. Section 362(b)(2)(B) exception to the stay.
  • Continue to collect child support via administrative order or statute.  Ie. Income deduction order for arrears or ongoing obligation through child support services.
  • Your client is still entitled to receive post-petition payment directly from the debtor; you may proceed with collecting delinquent DSO payments after the bankruptcy case is filed if the proceeding does not seek to collect property that belongs to the bankruptcy estate.  Ie.  Post-petition wages to collect child support (but probably NOT attorneys’ fees, unless they fit within the definition of a DSO pursuant to the bankruptcy code, without permission from the court via a motion for relief) in a Chapter 7 case.

Domestic Support Obligation Debtors:  If you represent a debtor who owes DSO and s/he files Chapter 7, advise your client that:

  • S/he is still obligated to pay ongoing post-filing domestic support obligations;
  • Domestic support obligations, such as child support and alimony (although can arguably be other types of payments), are not dischargeable in bankruptcy;
  • Payments of child support or other domestic support obligations via an administrative order, such as through child support services, cannot be stopped with Chapter 7.
  • Some debts incurred from a separation, divorce, or other domestic proceeding may be dischargeable if they are not considered domestic support obligations.

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