Your Alimony and Bankruptcy Questions Answered
Alimony, or otherwise called “spousal support” is financial assistance provided by one spouse to another after divorce. Alimony is typically ordered by the court or established by the couple themselves through mediation. Alimony is frequently used when one partner made considerable income while the other took care of the home. Someone who is considering filing for bankruptcy may wonder whether their alimony payments will be affected. Here we have answered questions commonly asked about alimony during bankruptcy:
Can both spouses file for divorce and bankruptcy at the same time?
If the spouses believe this is in their best interest, they can both file for bankruptcy and divorce. After filing for bankruptcy, an automatic stay will be enforced on all actions of collections. This means that any pestering emails, phone calls, and letters from collection agencies must halt, including legal actions such as lawsuits. But, the automatic stay doesn’t apply to disputes of spousal support. So, a partner who was required by the court to pay alimony must continue to do so despite applying for bankruptcy.
Alimony isn’t dischargeable during bankruptcy?
Correct, alimony payments and debts are not dischargeable even for someone who is operating under a bankruptcy chapter. While alimony cannot be eradicated entirely, there may be ways for it to be changed. For instance, the bankruptcy court may rule that late fees accumulated by the paying spouse can be discharged, but the alimony payments are not. Your lawyer may still advise listing the supporting spouse as a creditor on your bankruptcy paperwork, but with the perspective that the chances of it getting discharged are very slim.
Are there any exceptions to this rule?
In most cases, alimony cannot be discharged under bankruptcy. However, there are a couple of exceptions to this rule. The first, is that debts for alimony may be eliminated if it was legally transferred to another party by the supporting spouse. The second, is if the supporting spouse mischaracterized a portion of the divorce settlement as to alimony in exchange for less property.
Is it possible to modify alimony during bankruptcy?
Yes, the supporting spouse may be able to get alimony modification during bankruptcy if it greatly impacts their financial stability. The court may approve to have alimony decreased. If someone has applied for bankruptcy, then chances are they are struggling to pay into most of their debts, including alimony. But, the court views alimony as a priority debt, so it will take precedence over other obligations. The supporting spouse may still be required to pay alimony, especially if other debts were significantly eliminated, which should free up more finances for spousal support. Your lawyer can talk with you in further depth about how to pursue changes to alimony during bankruptcy.
Should I get a lawyer during this time I don’t already?
It is highly recommended that anyone who is balancing a divorce, alimony, and bankruptcy gets help from a legal professional. Your bankruptcy lawyer can advise you as to what actions will benefit you financially in the long run.