How is alimony or child support treated in bankruptcy?
The bankruptcy code refers to child support and alimony as domestic support obligations. Bankruptcy does not eliminate domestic support obligations, and ex-spouses and children receive considerable protection within the bankruptcy system.
The most important characteristics associated with domestic support obligations are: (1) they are priority claims under section 507(a)(1) of the bankruptcy code; and (2) they are non-dischargeable claims under section 523(a)(5). As priority claims, they receive payment before other unsecured creditors in a chapter 7 bankruptcy, and generally must be paid in full in a chapter 13 bankruptcy. As non-dischargable claims, the debtor remains responsible for paying them, even after completing bankruptcy and receiving a bankruptcy discharge.
In a chapter 13 bankruptcy, it is particularly important for debtors to pay all alimony and child support due after the filing of the bankruptcy. Failure to pay domestic support obligations that come due after filing bankruptcy is grounds for a chapter 13 case to be converted to chapter 7 or dismissed altogether under section 1307(c)(11). Additionally, not being current on required domestic support obligation payments is grounds to deny confirmation of a chapter 13 plan under section 1325(a)(8).
Martial property settlements arising out of divorce or separation agreements are not the same as alimony or a domestic support obligation. While such settlements are also non-dischargable in chapter 7, they may be dischargeable after the completion of a chapter 13 bankruptcy.