Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).
Dear To Her Credit,
What happens when
your ex-husband, who is currently giving you alimony, files for bankruptcy? How
does his filing of bankruptcy affect your alimony? Will he get out of paying spousal
support? -- Ana
Dear Ana,
If your husband hopes
he can get out of paying you alimony by filing for bankruptcy, he's going to be
very disappointed.
New York bankruptcy attorney Edward E. Neiger says, "Child and
spousal support, including child support and alimony, are not dischargeable in
bankruptcy."
In fact, under the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, back child
support and alimony must be paid before
any other creditor, including taxes owed. That's pretty amazing, but it shows
the importance placed on financial support for ex-spouses and children and
acknowledgement of the cost to society if that support is not received.
Just because alimony
is not dischargeable, however, doesn't mean you should sit back and wait to see
what happens. Neiger recommends that you file a "nondischargeability
complaint" to make sure your interests remain protected.
Because you are a
holder of a domestic support obligation claim, the trustee in the bankruptcy is
required by law to notify you -- and your state's Child Support Enforcement
Agency if applicable -- of the bankruptcy proceedings. You should get two
notices: one at the time of filing and another at the time of the bankruptcy
discharge.
To make sure you get
what's coming to you, you can hire a lawyer, or you may qualify for low-cost or free
legal advice where you live. When it comes to collecting the money you live on,
don't try to save money by going without good legal advice.
If your ex doesn't
have enough assets that the bankruptcy court can use to pay the back alimony,
you may have to accept catch-up payments. Your lawyer or other legal adviser
can help negotiate the amount per month he must pay, as well as how he will make
the payments.
After the
bankruptcy, assuming your ex has a loss of income or other drastic change in
circumstances from when the divorce was settled, he may try to get hardship
relief from full alimony payments going forward. He must go through the courts
to get such relief unless your decree had some provision for income
fluctuations and periods of unemployment.
In most states, your
ex could get an alimony modification by either petitioning the court and having
the court determine the new amount, or by coming to an agreement with you and
presenting filled-out forms to a judge to approve. Get good legal advice before
you agree to any adjustment to your divorce decree.
If your ex files for bankruptcy, it may actually work in
your favor. If some of his assets are liquidated in the bankruptcy, you may get
paid off. And once he gets rid of some of the other debts he's been juggling,
he should find it easier to pay you.
On the other hand, maybe when your ex finds out how many of
his debts won't be wiped out by bankruptcy, he'll decide it's not even worth
it. In addition to child support and alimony, he will find that bankruptcy generally
does not get him out of back taxes, student loans or debts secured by assets. Whenever
possible, it's better to just pay one's debts. Make sure your ex pays his debt
to you.
Sally Herigstad answers questions about credit every week for CreditCards.com. Herigstad is a certified public accountant, author and speaker. She also writes regularly for MSN Money, Interest.com, Bankrate.com and RedPlum.com, and has been a guest on Martha Stewart radio and other programs. You can read more about personal finance and download free budgeting worksheets at her website: www.sallyherigstad.com
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
Published: May 7, 2010
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