The Effects of Bankruptcy on Alimony

Alimony is protected from discharge through bankruptcy. Divorce decrees and separation agreements are covered by 11 U.S.C. Section 523(a)(15). This section states that these debts are not dischargeable unless:

(A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or 

(B) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor.

What does this mean? Fortunately for the dependent spouse, it means that alimony is not wiped out if the supporting spouse declares bankruptcy. Alimony is considered a priority, non-dischargeable debt, which a debtor cannot eliminate by filing for bankruptcy.

Depending on what type of bankruptcy you file, however, may determine whether you are able to enter into a repayment plan for any back-owed alimony. In a Chapter 13 bankruptcy, you may repay your portion of back-owed alimony over a period of three to five years. The dependent spouse will still get the money they are owed, it just may be repaid over a longer period of time. This helps the supporting spouse by giving them a longer period of time to repay their debt so that they may avoid potential jail time. 

Occasionally, in separation agreements, the parties agree to label an obligation alimony so that the paying spouse may deduct the payments from his or her taxes. These types of payments are not really alimony and may potentially be discharged through bankruptcy.

If you pay or receive alimony and believe that a potential bankruptcy may impact this, you may want to seek a consultation with a Huntersville alimony attorney. Adkins Law is located in Huntersville NC and primarily serves Mecklenburg County and the Lake Norman area. Contact Adkins Law to schedule a consultation with a Huntersville family law attorney. 

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