Alimony and Bankruptcy

Alimony and Bankruptcy

When you declare bankruptcy, it can be a relief, especially if you feel like your debts are piling up. You're free from collection calls; you're protected by the law and you can work on rebuilding your financial life. However, declaring bankruptcy can come with a new set of problems if you don't know what you're getting into and don't know when to file bankruptcy. What debts are erased? What debts are you responsible for? What kind of bankruptcy can you declare? What can you do about the debts that you're still responsible for paying?

There are two types of bankruptcy in American law:

  • Chapter 7, which is known as straight bankruptcy. In Chapter 7 rules, there is a complete liquidation of all assets that are not exempt. People under Chapter 7 bankruptcy may keep their automobiles, work-related tools, and some household furnishings.

  • Chapter 13, which is for people with a steady income. Chapter 13 laws allow bankrupts to keep their home and car and are given a 3-5 year debt repayment plan. They will make all the repayments and then a discharge of their debts will be given to them at the end of that time.

  • Both types of bankruptcy allow you to avoid foreclosures and repossessions; however, there are certain things that you will be responsible for. Under a personal bankruptcy, you are responsible for paying alimony, child support, student loans, taxes, and fines. However, you can request an adjustment in these debts if you can cite hardship as a reason for not paying.

    Alimony, or payments made to a former spouse if you are separated, cannot be erased from a bankrupt's debts. You will still owe this to your former spouse. However, there are ways that you can get help with this debt:

  • You can request a reconsideration of your alimony obligations from a judge. This can be a double-edged sword, however. Sometimes, the reduction of your debts can lead your ex-spouse to apply for an increase in any child support or alimony payments. However, you can also get a reduction in your alimony which may make it easier to pay.

  • If you are filing a Chapter 7 bankruptcy and you can't pay your alimony, the answer may be to find a chapter 13 bankruptcy lawyer to help you file for chapter 13. If your non-dischargeable debts (alimony, child support, etc) will exceed the income that you're making, then filing a Chapter 13 allows you to clear your debts after you have completed your payment plan. You will be assigned a certain amount of alimony to pay as part of your repayment plan, and then when you're finished paying off your debts, you will be charged your full amount. However, you will also be debt-free. Beware that alimony backs up during this time of repayment and plan for it accordingly.

  • If you are an ex-spouse receiving alimony payments and your paying ex-spouse goes bankrupt, you can request an investigation into their assets to make sure that you're not missing out on payments.

    Child support is another debt not erased by bankruptcy. Like alimony, you can choose to get a reprieve by filing Chapter 13 or you can ask the judge for a reassessment of your support payments. However, child support differs in the fact that this is your child that you are obligated to support. Your wages may be garnished in order to satisfy a child support order. If a court orders this, there's nothing you can do about it. You must pay the child support. Thankfully, your employer can't punish or fire you in any way for garnishing of wages.

  • Student loans differ from alimony and child support in the fact that they will expire after a certain amount of time. Filing a Chapter 13 will ensure that they are still getting paid through your repayment plan. Your creditors cannot come after you while you are bankrupt. Afterwards, your loans will be paid off.

    When you're bankrupt, financially, you're in a tough place. Life does go on and so do your obligations. Always consult a lawyer if your non-dischargeable debts exceed your income. Since new bankruptcy laws 2005, they will know exactly what to advise you in this situation. As well, check your conditions about applying for new jobs under bankruptcy. You are protected from your creditors, but you do have to follow the rules of your ruling. Get more information on chapter 7 bankruptcy laws and chapter 13 bankruptcy information from your local attorney as soon as you can.

    With help, bankruptcy - and debt - can become a thing of the past for you and you can start to move on with your life, debt-free.

    Related Articles:

    +   Discharging debts in bankruptcy cases
    +   Bankruptcy and student loans
    +   Child support and bankruptcy
    +   Information about filing for personal bankruptcy online