The question of whether a particular debt is dischargeable may arise with domestic support obligations. These debts include not only child support and alimony, but could also include a credit card balance required by a family court order to be paid by a person. This account would be listed as an unsecured priority debt on Schedule E of the bankruptcy petition and would not be dischargeable in bankruptcy. The reason is that an existing family court order not yet modified otherwise cannot be vacated by a subsequent bankruptcy filing. Of course, this is a general principle as family law varies widely from one jurisdiction to another. Consult first with a licensed family lawyer in your jurisdiction and then with a qualified bankruptcy practitioner in the area in order to determine your rights.
January 19th, 2010 by Administrator
A recent 1st U.S. Circuit Court of Appeals decision allows late payment penalties imposed on untimely alimony payments to not qualify as a domestic support obligation and therefore be dischargeable. The decision in In Re: Smith, Nelson J. (Docket No. 09-9005), an appeal from the Bankruptcy Appellate Panel for the 1st Circuit, found that “the late fee was intended to encourage payment of alimony and was not itself alimony . . . Since (obligee) had no expectation of this payment unless and until (obligor) was late, it follows that the only way this contingent payment could be considered alimony is if it was meant to compensate (obligee) for the time during which she was waiting for her alimony payment.” This late payment penalty was a fixed fee and “had the parties provided for an interest-bearing fee, contingent on the amount of alimony outstanding, (obligee) would have a stronger argument.” In fact, the penalty was also separate from the costs of a contempt action as “legal fees incurred in enforcing the agreement, a provision not always contemplated in such contracts, were clearly provided for in this instance.” While this decision is only applicable to cases filed within the 1st Circuit’s jurisdiction, a qualified bankruptcy practitioner in your area can clarify for you whether or not a particular debt owed would be considered a domestic support obligation for the purposes of dischargeability.
November 30th, 2009 by Administrator
