I wrote last week about how to deal with divorce debts in Chapter 7 Bankruptcy. Chapter 13 has different rules and different ways to deal with family court debts.
1. Chapter 13 can’t discharge domestic support obligations. Domestic support obligations (child support/maintenance) can’t be wiped out in any form of bankruptcy, Chapter 7 or 13. In Chapter 13, to get a discharge the debtor must pay all child support/maintenance arrears, as well as all payments due during the three to five years of the Chapter 13 plan.
2. Chapter 13 can wipe out other debts created by a divorce decree. Debts created by a divorce decree that don’t count as domestic support obligations (e.g. property settlements, equalizers, or promises to pay joint marital debts) can be wiped out in Chapter 13 bankruptcy. These debts aren’t always wiped out in a Chapter 7, so for people with large debts like this, Chapter 13 can be a much better choice.
3. Child support and maintenance arrears can be spread out over five years in Chapter 13. If you’re behind on child support and maintenance, Chapter 13 gives you the ability to put those arrears into a Chapter 13 payment plan. This wouldn’t relieve you from your obligation to pay child support or maintenance payments that come due after the bankruptcy is filed, but if you’re facing garnishment or other collection, it can buy you breathing room to pay arrears over time. This may also reduce the amount you’re required to pay your other, unsecured creditors.
As discussed above, Chapter 13 has many advantages over Chapter 7 when it comes to dealing with divorce debts. If you have questions about how to deal with your family law debts in bankruptcy, get in touch.