How Does Bankruptcy Affect Alimony?

While laws regarding spousal support have changed significantly in recent years, the Chapter 7 alimony laws in the Bankruptcy Code have largely remained the same. Bankruptcy has only a limited and indirect effect on spousal support or alimony obligations. A person paying alimony is still obligated to pay that support despite filing for bankruptcy. Alimony is not a dischargeable debt.

What is Alimony?

Alimony, which is sometimes called spousal support, is court-ordered provisions to be paid to one spouse by the other spouse after the divorce or separation. Alimony may be paid in a lump sum or in payments on a set schedule, such as weekly or monthly.

The spouse making the payments is the “supporting spouse.” They make payments to the “dependent spouse.” Alimony is awarded when one spouse needs the funds to take care of his or her needs and the other spouse has adequate income and can afford to pay alimony.For example, if Joe pays his ex-wife Nora $2,500 each month in alimony, he will still have the obligation to pay Nora during and after his bankruptcy case concludes. He will also likely have to pay any past-due spousal support.

What if I’m the One Receiving Alimony?

Let’s stick with our example from above. If Nora files Chapter 7, she must report her alimony payments from Joe on both Schedule I and any 122A means test forms she files.

If you’re receiving alimony payments than you must report the amount of alimony you receive each month. If your payments vary from month to month, the best practice is to take the last six months of receipts and use the average monthly figure.

The alimony payments you receive may impact how the means test is calculated.

The Long Term Effect of Bankruptcy on Alimony

Bankruptcy does not discharge alimony obligations. However, the automatic stay may influence a person’s obligation to pay alimony during a pending bankruptcy. Filing for bankruptcy may also influence any modifications to alimony obligations.

In any case, there are certain exceptions to the application of the automatic stay. Legal actions involving alimony payments are one of those exceptions. So long as the legal proceeding does not involve the non-filing spouse seeking to distribute property that is considered to be part of the bankruptcy estate, the automatic stay will not prohibit the commencement or continuation of such a case in civil or domestic relations court.

If a debtor’s income is being withheld for family support obligations as the result of an administrative or judicial order, the withholding will continue even after a bankruptcy is filed. The automatic stay will not be applied to stop wage garnishments for the purpose of family support obligations.

Conclusion

If you receive alimony, you must list the amount on Schedule I and on Form 122A of your petition. If you pay alimony, you must list it on your Schedule J.

The automatic stay may affect your obligation to pay alimony during a pending bankruptcy, but not necessarily so. Any wage garnishments for the purpose of alimony will continue even after a bankruptcy case is filed. Legal proceedings involving alimony obligation matters, in most cases, are an exception to the automatic stay.