Domestic Support Obligations Bankruptcy

DOMESTIC SUPPORT OBLIGATIONS BANKRUPTCYAnother important exception to bankruptcy is domestic support obligations.  Domestic support obligations are not discharged in bankruptcy and are therefore referred to as an exception to bankruptcy.  Intentional torts are another exception to bankruptcy and were discussed in our prior article.

Domestic support obligations are defined by federal and not state law.  11 USC 101(5) states that a domestic support obligation is not discharged in bankruptcy.  11 USC 101(15) furthermore states that monies owed “to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or in a determination made in accordance with State or territorial law by a governmental unit” are likewise, not discharged in bankruptcy, and are an exception to bankruptcy.

Domestic support obligation is broadly defined to include any debt that accrues before or after the filing of the bankruptcy, including any interest that accrues on nay debt that is recoverable by the spouse, former spouse, or child of the debtor, or the child’s parent, legal guardian, or caretaking relative, or a governmental unit.  A domestic support obligation is any debt in the nature of alimony, child support, maintenance or support.  Such obligations can be considered to be domestic support obligations regardless of whether such obligations are so named domestic support obligations.

If the debt is assigned to a non-governmental entity, such debt is not a domestic support obligation unless the obligation is voluntarily assigned by the spouse, former spouse, or child of the debtor, or the child’s parent, legal guardian, or responsible relative, for the purpose of collecting the debt.

The 2005 BAPCPA removed the ability of a debtor in bankruptcy to discharge obligations to a former spouse resulting from a divorce decree, separation agreement or equitable distribution award.  All domestic award obligations are nondischargeable under bankruptcy code section 523(a)(5).  Furthermore, bankruptcy code section 523(a)(15) holds that any obligations not covered by 523(a)(5), such as obligations arising from a property settlement or division, owed to a “spouse, former spouse, or child of the debtor, are not discharged in bankruptcy, if such debts were “incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record.”

In a Chapter 13 bankruptcy, whether an obligation is a domestic support obligation or an obligation arising from a property division or settlement is an important consideration.  In Chapter 13 bankruptcy, a domestic support obligation is deemed to be a priority claim under bankruptcy code section 507(a)(1)(A).  A priority claim must be paid in full pursuant to the debtor’s Chapter 13 plan under bankruptcy code section 1322(a)(2), and a priority claim must be paid before any creditors with a lower classification of claim, such as general unsecured creditors.

Other benefits accrue to a claimant holding a domestic support obligation claim in a Chapter 13 bankruptcy.  Under bankruptcy code section 1325(a)(8), the Chapter 13 debtor’s plan cannot be confirmed or approved by the bankruptcy judge, if the debtor is delinquent on his or her domestic support obligations.  Additionally, the person owed the domestic support may seek the dismissal or conversion of the Chapter 13 bankruptcy if the debtor is delinquent on any post-petition domestic support obligation.  Finally, the debtor will not receive a discharge in a Chapter 13 bankruptcy unless he or she is current on any such support obligations, both before and after the filing of the bankruptcy.

In determining whether a debt is a domestic support obligation, one should first look to the objective criteria contained in section 101, including the identity of the recipient or payee, what type of instrument created the obligation, and whether the obligation has been assigned.  Defining whether a debt is a domestic support obligation becomes more clouded when addressing the requirement of subsection B of 101 which states that the obligation must be “in the nature of alimony, maintenance, or support.”  When such determinations are unclear, the courts typically examine the intent of the parties.  If the parties intended that such obligation arose from a property settlement or division, then the obligation is not a domestic support obligation.

The Fourth Circuit Court has fashioned an unofficial test to determine the intent of the parties.  The Fourth Circuit examines first the language of the agreement.  Whatever labels the parties attach to various obligations are not controlling.  The questions employed by the court include whether the debt actually is in the nature of alimony, maintenance or support, was payment to be made in a lump sum or single payment or as a monthly obligation, what is the tax treatment of the obligation, did the parties waive support, and whether such obligations arise under provisions in an agreement governing support or property division.

Secondly, the Fourth Circuit will consider the financial condition of the parties.  What are the employment history, present and potential earning power of the respective parties?  Who has custody of the children?  The court will also consider the function of the obligation.  Does the obligation provide for daily necessities, such as food and shelter, or act as a mechanism for division of property?

Finally, the Fourth Circuit will consider evidence of overbearing or the respective power or position of the parties.  What is the bargaining power of the respective parties?  Did one party lack legal representation?  Are there provisions in the agreement that clearly favor one party over another?

If a debt is classified as a domestic support obligation, the Chapter 13 debtor must cure any delinquencies during the course of the Chapter 13 bankruptcy.  In addition, the debtor must make any ongoing, post-petition payments pursuant to the domestic support obligation.  Failure to do so may result in the dismissal or conversion of the Chapter 13 bankruptcy or the denial of a discharge.

However, domestic support obligations that are assigned to a governmental unit may be paid less than the full amount, or 100%, of the obligations, in a Chapter 13 bankruptcy, provided the debtor commits all of his disposable income to the Chapter 13 plan, over a period of five years.  Bankruptcy code section 523(a)(18) governs domestic support obligations owed to governmental units.   However, unlike obligations that fall under 523(a)(5), 523(a)(18) permits the super discharge for debtors who complete the Chapter 13 plans, provided all disposable income is committed to the plan and the debtor completes a five-year plan.

This is an important difference in treatment of domestic support obligations.  Many bankruptcy attorneys are unaware of the differing treatment of such domestic support obligations assigned to a government entity under 523(a)(18), mistakenly believing that such obligations are given the full protections offered under 523(a)(5).

A number of interesting cases addressed the issue of domestic support obligations and their treatment in bankruptcy.  In the matter of the State of Florida Department of Revenue versus Irain Lazaro Gonzalez in the Eleventh Circuit, the debtor received notice that his work-related travel reimbursement would be seized by the State of Florida Department of Revenue, to reimburse the debtor’s domestic support obligation.  The debtor’s Chapter 13 plan provided for full payment of the arrearages owed pursuant to the domestic support obligation and ongoing child support to the oblige.  Because the Department of Revenue attempted to seize the payment after the confirmation of his Chapter 13 plan, the bankruptcy court found that the Department violated the bankruptcy court confirmation order, awarding attorney fees to the debtor.  The district court affirmed the bankruptcy court decision, and the circuit court agreed.

In Gonzalez, the court considered the relationship and possible conflict of bankruptcy code section 362 and 1327.  Bankruptcy code section 362 provides an automatic stay against “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case” after the bankruptcy filing.  However, bankruptcy code section 362(b)(2)(C) allows the “withholding of income that is a property of the estate or property of the debtor for payment of a domestic support obligation under a judicial or administrative order or a statute.”

However, bankruptcy code section 1327(a) provides “the provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.”

In addressing this conflict, Gonzalez argued that if Congress intended that the domestic support obligation collection efforts be exempt from section 1327(a), it would have so provided.  Second, by allowing a creditor to make such collection efforts after the confirmation of the Chapter 13 plan would essentially imperil any Chapter 13 bankruptcy involving a domestic support obligation creditor.

The court concluded that while the “legislative intent behind section 362(b)(2)(C) permits a domestic support obligation creditor to collect notwithstanding the automatic stay”, there is no indication that Congress intended this exception to interfere with the binding effect of a confirmed plan pursuant to section 1327(a).  While the Department of Revenue did not violate the automatic stay when it intercepted Gonzalez’ travel reimbursement, it did violate the confirmed chapter 13 plan.

The United States District Court case in the Western District of Oklahoma, Tucker v Oliver, considered whether an award of attorney fees qualifies as a domestic support obligation within the meaning of 11 USC 101(14A), making such obligation excepted from discharge under 11 USC 523.

The Olivers were the grandparents of the Tucker’s child, and brought suit, unsuccessfully, to seek visitation with their grandchild.  The State Court denied Oliver’s request and awarded attorney fees against the Olivers, and in favor of Tucker.  The Olivers subsequently filed bankruptcy.

The court found that the attorney fees determined to be owed to Tucker are dischargeable in bankruptcy.  The court wrote, “The question boils down to whether the attorney fee judgment qualifies as a domestic support obligation within the meaning of 11 USC 101(14A), thus making it dischargeable under 11 USC 523.  Section 101(14A) expressly defines the persons to whom the court –ordered, support related obligation must be owed for it to be a domestic support obligation.”  Continued the court, “To qualify, the debt must be owed or recoverable by a “spouse, former spouse or child of the debtor or such child’s parent, legal guardian, or responsible relative”.  Since Tucker was the former daughter in law of the debtors, she is none of these parties, and therefore section 523 does not prevent the discharge of the obligation.

The Eighth Circuit case of Burnett v Burnett addressed the issue of whether a debtor who successfully completed a Chapter 13 plan which provided for the payment of all spousal support arrearages in full, could subsequently be liable for accrued interest on the arrearages.  The court found that bankruptcy code section 1327(a) “affords the confirmed plan re judicata effect and bars Ms. Burnett’s attempts in a collateral state court proceeding to expand her entitlement to relief to include interest on her pre-petition spousal support.  However, Ms. Burnett may seek any post-petition spousal and child support obligations, as the bankruptcy code permits no proof of claim for such obligations.

The quality, definition and treatment of domestic support obligations in bankruptcy is a prominent subject in bankruptcy law.  There are numerous conflicting policies and bankruptcy code sections that are inherent in many determinations of how various issues regarding domestic support obligations should be answered.  The practice of bankruptcy law is becoming progressively more complex.  Careful consideration should be taken of any issue relating to domestic support obligations in bankruptcy.  A knowledgeable and practiced bankruptcy attorney may be a necessary asset in addressing such matters.

Jay Weller is a bankruptcy attorney, practicing in western Florida.  Since 1993, Weller Legal Group has represented many tens of thousands of clients in bankruptcy proceedings.  With offices in Clearwater, Port Richey, Brandon, and Lakeland, Weller Legal Group is the oldest remaining law firm in western Florida, with a sole concentration of bankruptcy law, and the capability of representation among multiple offices.  Mr. Weller can be contacted through the website,, or by contacting him directly at our Clearwater office, at 727-539-7701.