What we know so far about domestic support obligations in bankruptcy is that they are non dischargeable and the bankruptcy court has the last word as to what is and is not support.
But we just scratched the surface in looking at support when we considered obligations from one spouse to another.
Debts owed to an extended cast of supporting characters may be “support” as well, non dischargeable and carrying a priority for payment.
Supported party’s professionals
While support to a former spouse may be a monthly obligation, don’t overlook family court orders that one spouse pay a fixed sum to the other party’s lawyer. If based on need or disparity between the financial capacity of the spouses, that award of the other party’s attorneys fees may be in the nature of support as well. Anderson, 300 B.R. 831 (WD NY).
You can expect that attorneys fees incurred to establish, modify, or collect support will themselves be found to be in the nature of support.
Professionals appointed to represent the interests of minor children may have claims that are in the nature of support. In Chang, the 9th Circuit held that the state court order requiring payment by the debtor to the child’s guardian ad litem was non dischargeable support, despite the fact that the statute on its face speaks of debts owed “to” a spouse or child. The nature and purpose of the fees here were held to be a debt to the child. Chang, 163 F.3d 1138 (9th Cir. 1998).
Payments to other third parties
Bankruptcy courts have found that judgments requiring payment by the debtor of obligations to third parties whose claim arose quite outside the divorce proceeding to be support.
Mortgage payments: debt service on the house the ex spouse lives in may be support. Maitlen, 658 F.2d 466 (7th Cir. 1981).
Payment of spouse’s debts: obligation may be support despite label as “property settlement”. Williams, 703 F.2d 1055 (8th Cir. 1983)
Educational expenses of children: such obligation may be support even if the expenses will be incurred after the offspring reaches the age of majority. Boyle, 724 F.2d 681 (8th Cir. 19840
Public benefits provided children State’s claim to recover overpayment in aid to children held to be DSO; Anderson 439 BR 206. watch also for governmental expenses for children in protective or punitive custody.
Why the determination may not matter
Having spent all this time working out whether a debt is support, and therefore non dischargeable, in many of your cases for a debtor in a no asset Chapter 7 case, it doesn’t matter.
Enter Section 523(a)(15), making non dischargeable debts
to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit;
So, if the debt is incurred to (or “for the benefit of” we can add in light of the case law) a spouse or child in the course of a separation or divorce, it isn’t dischargeable, regardless of its characterization.
But, wait! wait! There’s more:
Section 523(a)(15) isn’t included in the debts not dischargeable in Chapter 13!
So, the issue of whether an obligation is a domestic support obligation is chiefly important in Chapter 13, where it would be dischargeable without necessarily being paid in full, or, in a Chapter 7 asset case, where the non dischargeable support obligation might be paid in full or in part.
The Bankruptcy Family Law Series: ♦ Spouses as source of Conflicts ♦ Starting with support
Image courtesy of Wikimedia.
J. kaufman says
Excellent post! Thank you for pointing out these decisions….as sometimes the issue is not very clear. Question is though, should the Debtor be pro-active to have the Court determine whether a claim is a DSO. Since a support obligation does not fall with in 523(a)(2), (4), or (6), the claimant can bring this issue up well after the chapter 7 case has closed. So it might behoove the debtor to trigger the issue. In a Chapter 13, typically the claimant must advise whether its claim in entitled to priority (523(a)(15) is not a priority claim, unlike 523(a)(5)), and so the claimant might trigger that issue with its claim in a chapter 13.
Anyways it is something to consider, and the answer, or course, depends on the particulars of each case.