Alimony in Bankruptcy
According to the Census Bureau, 7% of divorce decrees include a provision for alimony or spousal support. When your spouse, who owes you alimony or support files for bankruptcy, it may lead you to wonder whether you can still collect.
For the party receiving alimony, those payments are considered income under your bankruptcy estate. When your monthly income is calculated to determine whether you qualify for Chapter 7, alimony payments will be included in the amount. However, under most exemption laws, alimony is exempt from the estate, meaning it will not be used to pay creditors. Additionally, in a Chapter 13 plan, your alimony will be deducted before determining your monthly disposable income, which may determine how much you owe your creditors.
Alimony payments, along with child support, are exempt from bankruptcy’s automatic stay. This means that the party who pays alimony cannot avoid making those payments by filing a petition for bankruptcy. Further, a party seeking alimony or child support payments, either to initiate or modify them, can still commence or continue the action.
Above all, alimony is a non-dischargeable obligation. It cannot be avoided or wiped clean in bankruptcy. There is a strong policy behind this, so someone who has a right to receive alimony should not fear the outcome of bankruptcy on his or her rights.
For more information please contact our firm.