After divorce many clients find themselves in debt. The debt can be credit card debt used to pay a divorce lawyer or afford daily expenses. Likewise, the debt can be newly established spousal support or child support. When faced with debt resulting from divorce many clients explore their debt relief options in bankruptcy.
Credit Card Debt
Fortunately, credit card debt is general unsecured debt. As a result, credit card debt is dischargeable (can be eliminated) in chapter 7 bankruptcy and chapter 13 bankruptcy. Whether credit cards were used to satisfy increased living expenses or pay a family law attorney, credit card debt is generally dischargeable in bankruptcy. The only exception is fraudulently incurred credit card debt – but the bankruptcy code’s elements for non-dischargeability due to fraud make the exception to discharge inapplicable in many cases involving old credit card debt.
To learn more about eliminating credit card debt in bankruptcy call our bankruptcy attorney at (916) 596-1018 for a free consultation.-Attorney Adam Garcia
Domestic Support Obligations
Unlike credit card debt, domestic support obligations are non-dischargeable in chapter 7 bankruptcy and chapter 13 bankruptcy. [11 USC 523(a)(5)].
“Domestic support obligation” is defined in the bankruptcy code as a debt
- owed or recoverable by a spouse, former spouse, or child of the debtor
- in the nature of alimony, maintenance or support, &
- established by a separation agreement, divorce decree or property settlement agreement, or a court order.
Non-Support Family Law Debts
In addition, 11 USC 523(a)(15) also makes debts to a spouse, former spouse, or child that is not a “domestic support obligation,” but that is incurred by a debtor in the course of a divorce, separation or in connection with a separation agreement, divorce decree or other court order, non-dischargeable in bankruptcy. Accordingly, nearly all orders for support or property division are non-dischargeable in bankruptcy if incurred in connection with marital dissolution or separation.
Exception in Chapter 13 Bankruptcy
While child support and spousal support are non-dischargeable in chapter 13 bankruptcy pursuant to 11 USC 523(a)(5), non-support family law debts under 11 USC 523(a)(15) such as property settlements may be dischargeable in chapter 13 bankruptcy if the debtor completes all payments under the plan.