Domestic Support/Child Support

Discharge of Domestic Support Obligations

Support payments are nondischargeable in Chapter 7, 11 and 13. The Bankruptcy Code explicitly exempts “domestic support obligations,” 11 USC §101(14C) which include any debt owed to a “spouse, former spouse, or child” in the nature of “alimony, maintenance, or support,” from discharge. 11 USC §523(a)(5). So the paying spouse can’t get out of support payments simply by filing for bankruptcy.

Interest accruing on support obligations is also nondischargeable, so it’s important that the paying spouse stays on top of payments even if he or she is contemplating bankruptcy.

Priority of Payment

In a Chapter 7:

In addition to being nondischargeable, past due domestic support obligations are a priority debt in bankruptcy. In fact, domestic support obligations have the highest priority of any type of debt in bankruptcy – even ahead of bankruptcy administrative expenses. This means that if there are any proceeds to distribute in a Chapter 7 bankruptcy, support obligations are the first creditor to receive payment. 11USC §507(a)(1). To get paid in bankruptcy, the recipient spouse or child or the appropriate state child support agency must file a proof of claim with the court and include supporting documentation to show the amount of back child support owed. If there are no assets to distribute, the receiving spouse will not receive anything from the paying spouse’s bankruptcy. But the bankruptcy discharge will not eliminate the outstanding child support arrears.

In a Chapter 13:

The paying spouse must pay off all of his outstanding priority obligations (e.g. back child support) through the repayment plan. The paying spouse must pay off all of outstanding child support arrears and be current on ongoing support payments before he can receive a Chapter 13 discharge. The chapter 13 petition will be dismissed if the debtor falls too far behind in post-petition support obligations. 11 USC §1307(c)(11).

Automatic Stay Doesn’t Apply to Domestic Support Obligations

Support payments are exempt from the automatic stay. Although an automatic stay is triggered whenever someone files for bankruptcy, support obligations are exempt from its general prohibition against litigation and debt collection activities without prior court approval. 11 USC §362(b)(2)(B) and (b)(2)(C).

What if the court discharges the support order anyway

While court ordered support obligations and federal taxes are exempt from discharge, they will occasionally end up being discharged (It’s much like winning the lottery.)

It only happens in asset cases where creditors must file a proof of claim, the creditor does not file a proof of claim, and the debtor moves to have the exempt obligation discharged. (Used to happen with taxes in Chapter 13s with some regularity when the IRS’s records weren’t as automated as they are now.)

I’d say the pre-bankruptcy lien attaches to the post-discharge property in two circumstances:

1. A no asset case or a case where a proof of claim was filed; and

2. If an order was issued discharging the pre-petition child support obligation secured by the lien and the debtor was still under a support order (Child support accrued each month post-petition until child was 18, etc.), the unpaid post-petition obligation becomes a lien secured by the original lien filing. Child support liens in nearly all states secure unpaid future support until the obligation to support terminates as well as the money owed when the lien was filed. (Kind of like an equity line where money is advanced each month.)

Regardless, this is an unusual enough fact pattern that it should be discussed with underwriting before agreeing to insure over the domestic support obligation.