When Congress revamped the bankruptcy laws in 2005, it sought to protect the rights of divorced (or soon-to-be-divorced) people. One of the things they did was clarify the definition of debts that were incurred by a debtor for the support of another, whether that be a child or an ex-spouse. This they did by creating the term “Domestic Support Obligation” or DSO.
So What Is a Domestic Support Obligation?
In essence, a DSO is a debt (including interest) that accrues before, on, or after the date a bankruptcy is filed that is in the nature of alimony, maintenance, or support. This debt can be owed to a spouse, former spouse, or child (or parent of said child). A DSO can be created by a:
- Separation agreement
- Divorce decree
- Property settlement agreement
- Court order
- Determination made by a “governmental unit.”
DSOs are given quite a bit of priority under the bankruptcy code, often one of the first debts paid by a bankruptcy trustee. In addition, they are automatically non-dischargeable. This means that they cannot be wiped out in a chapter 7. They also must be paid in full in a chapter 13. For this reason, careful consideration needs to be given this type of debt when filing.
Bankruptcy Can Help You Afford to Pay a DSO
These types of debt cannot be wiped out in a bankruptcy, but the bankruptcy can help you afford to pay it by wiping out other debts and freeing up funds in your budget. If you've gotten behind in the payments, a chapter 13 bankruptcy can help you get current by proposing a repayment plan over time, while other debt takes a back seat or even gets discharged!
So What Do I Do?
Bankruptcy may well be the right solution for you if other debt is preventing you from paying it. If you live in Burlington, Camden, Gloucester, Salem or Cumberland County, are in the midst of a divorce, or soon will be, expect to be the payer or recipient of a domestic support obligation, and are thinking about filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this web site for a free consultation in my Woodbury office.
If you are looking for more information on how bankruptcy might help you with your divorce, then you should download my free book, Top Questions Divorcing Couples Ask About NJ Bankruptcy.
Not sure if bankruptcy is right for you? Take the quiz to the right to find out more!
If you liked this information and found it useful, then you might like or need these others:
- What do I do if my spouse files for divorce while I am in bankruptcy?
- Can I discharge alimony or child support in a NJ bankruptcy?
- Are awards of attorney's fees for obtaining alimony and child support in NJ dischargeable in bankruptcy?
- How to Get Current on NJ Alimony and Child Support in a Chapter 13 Bankruptcy