The burden of debt can weigh you down, affecting every area of your life. Even your relationships and your physical health may suffer if you are struggling to keep up with your creditors. If your financial difficulties began or worsened after your divorce, you are not alone. Divorce is often the catalyst for a sharp decline in one’s standard of living. It is not unusual for this to reach a crisis point within the first few years after a separation.
If you are exploring your options for debt relief, you may be considering bankruptcy. Depending on your circumstances, bankruptcy has the potential for eliminating or reducing your debt considerably and giving you a fresh start. But what if your debts include obligations related to your divorce, such as child support or alimony?
Can bankruptcy help?
Unfortunately, back payments of child support and alimony are immune from bankruptcy proceedings. The court refers to these as domestic support obligations (DSOs), but the issue may not be as cut and dried as it sounds. For the court to exclude any DSO from a bankruptcy discharge, the payment must meet certain requirements, such as these and others:
- Your divorce decree must characterize the payment as support, not as part of your property division, and list the obligation in the support section.
- Your spousal-support obligation must expire with the death or remarriage of your former spouse.
- Your income must be significantly higher than your former spouse’s, and the payments you make have the goal of balancing the discrepancy.
- Your former spouse has custody of your children.
These and other factors mean your debt is DSO, and bankruptcy cannot eliminate it. However, there are cases in which “support” payments may actually be part of a property division settlement, so it is a good idea to have a Texas attorney review your divorce decree. A Chapter 13 bankruptcy can discharge certain types of property settlement debts and may be able to help you manage any DSO that is not discharged.
Consult a professional
Chapter 13 bankruptcy reorganizes your debt, giving priority to items like domestic support obligations and basing your repayment on your disposable income. You may find this provides you with the ability to repay what you owe your former spouse for support as well as obtaining some breathing room through the discharge or reduction of your remaining debts. An attorney can help you determine whether bankruptcy is appropriate for your circumstances.