Nothing complicates a divorce or family law proceeding like a bankruptcy filing. The bankruptcy can be filed by the obligor or the obligee. Regardless of who files, it adds a complex wrinkle into the proceedings. If you don’t know what you are doing, you could violate the bankruptcy rules and the Family Code. Bankruptcy rules can be unforgiving; any violation of it could cost you tens of thousands of dollars in sanctions. The Family Code can cost you anything from sanctions to orders that may be subject to elimination through a bankruptcy proceeding. How you protect yourself from the latter needs to happen long before your spouse thinks about getting rid of their debt through a bankruptcy action.
As a general rule, and this is where you need the help of experts, orders in the “nature of support” are not dischargeable. This includes any money you, your ex-spouse, or your children require to survive:
So is the solution to simply designate everything as being in “the nature of support”? You could attempt this, but it is not that easy. What is “in the nature of support” is a legal question that the bankruptcy judge decides. While a child and spousal support order may be easy to protect from dischargeability, what if part of the debt is for attorneys’ fees to get the child and spousal support orders in the first place? Would those attorneys’ fees be categorized in the “nature of support”? Maybe. Again, the law carries a degree of uncertainty with it. You want to make sure it is written in a light most favorable to that argument.
What if you have a wage assignment on an obligor and he or she files for bankruptcy protection? Do you have to stop the garnishment? Let’s say you are taking a different enforcement action against the obligor. Are you bound by the “automatic stay”? You might be bound by an automatic stay, but there are exceptions. The answers depend on when the bankruptcy was filed, what type of bankruptcy was filed (Chapter 7 or 13), and what type of enforcement action you are taking. Unfortunately, a specific answer cannot be provided here. Every situation is unique, so the legal circumstances will dictate unique answers.
All of those questions require insight from an experienced lawyer. Our attorneys can answer your questions and make sure that you are not only avoiding bankruptcy rule violations, but also ensure that your support continues uninterrupted. This is a situation where you do not want to go it alone. Turn to the Edgar & Dow to discuss your situation.
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