Can Alimony Be Discharged in Bankruptcy in New Jersey?
Bankruptcy provides relief from immediate debt collection and allows you to discharge many outstanding debts. Ordinarily, bankruptcy allows you to discharge debts from credit cards, medical bills, and personal loans. However, bankruptcy will not discharge most legal obligations, including alimony or spousal maintenance.
An estimated 23,168 New Jerseyites go through a divorce each year (considering the 2019 divorce rate of 2.5 per 1,000 inhabitants and 2021 population estimates of 9,267,130). Also, in 2019, 25,380 New Jerseyans filed for bankruptcy. It’s common for divorce and bankruptcy to go hand in hand. They both usually involve a change in living situation and finances. Many people going through a divorce wonder, can alimony be discharged in bankruptcy?
As a dedicated bankruptcy attorney, Joel R. Spivack often hears this question from prospective clients. This page will explain why bankruptcy won’t discharge your alimony payments or alimony debt. At the end, this page will explain how filing for bankruptcy can help you get back on track.
What Does the Law Say About Bankruptcy and Alimony?
Under New Jersey divorce law, your divorce decree may require you to send monthly alimony or maintenance payments to your ex-spouse. Such payments are meant for each spouse to maintain a reasonable standard of living comparable to the one established during the marriage. You may be familiar with the 14 statutory factors that the family court judge will use to determine the need for alimony, such as the length of the marriage, the parties’ ages, and their ability to pay.
To determine if alimony will be discharged in bankruptcy, we must look to the Bankruptcy Code, a federal law. In bankruptcies under Chapter 7, Chapter 11, or Chapter 13, bankruptcy will not discharge a domestic support obligation (see 11 U.S. Code § 523(a)(5)).
A bankruptcy filer hoping to escape payments may rightly see that the words “domestic support obligation” do not appear in either their divorce degree or the New Jersey divorce law. Nevertheless, the Bankruptcy Code defines a non-dischargeable “domestic support obligation” to include New Jersey’s spousal maintenance or alimony payments.
What Is a Domestic Support Obligation in the Bankruptcy Code?
The Bankruptcy Code’s definition of a “domestic support obligation,” in 11 USC § 101(14A), includes any type of support payments that you owe to a spouse. The law defines a domestic support obligation as a debt that:
- You owe to a former spouse when you file for bankruptcy;
- Is “in the nature of alimony, maintenance, or support”; and
- Your divorce decree or property settlement agreement requires you to pay.
The phrase “in the nature of” expands the definition of “support” to include other obligations that function as support even if your divorce decree does not explicitly label them as “alimony” or “maintenance.” Because the Bankruptcy Code explicitly excludes all domestic support obligations from a bankruptcy discharge, you must still pay alimony after bankruptcy.
How Can Filing for Bankruptcy Can Help
As experienced bankruptcy attorneys, we have heard these reasons to file bankruptcy from our clients who make alimony payments:
- Filing for bankruptcy can help you reduce other debts, so you can commit more income to make your alimony payments.
- If your financial circumstances have changed so that you’ve had to file for bankruptcy, your divorce decree may qualify for a modification.
- When you file for bankruptcy, you receive an automatic stay. The automatic stay immediately stops all collection efforts on past due debts, including domestic support obligations. However, your requirement to make future payments will not change.
- When you have fallen behind on your alimony payments, what you owe is considered a priority debt that you must pay before other unsecured debts. However, with a Chapter 13 repayment plan, you may take three to five years to repay the outstanding amount.
While filing for bankruptcy won’t discharge your alimony debt, it can help give you a fresh start. Whether you file for a Chapter 7 liquidation or Chapter 13 repayment plan, you need an experienced attorney to guide you through the bankruptcy process and ensure you get a fair result. With over 30 years of experience representing clients in consumer bankruptcy cases, Mr. Spivack is here to help you. He has focused his practice on consumer bankruptcy matters and made it his goal to help clients obtain debt relief through Chapter 7 and Chapter 13 bankruptcy.
If you have questions about consumer debts and the bankruptcy discharge in the Delaware Valley, the Law Office of Joel R. Spivack is happy to provide a no-obligation consultation so you can understand your options today. Contact us online or call us directly at 856-488-1200.