Divorce often brings financial challenges, and alimony payments can become a significant part of post-divorce life. But what happens when the paying spouse declares bankruptcy? This scenario occurs more often than many realize, especially during economic downturns.
In Rockville, Maryland and across the U.S., the interplay between bankruptcy and alimony creates a unique legal situation that both parties must address.
Alimony and bankruptcy basics
Alimony is a court-ordered payment from one ex-spouse to another after divorce. It aims to support the lower-earning spouse, helping them maintain their standard of living. Bankruptcy is a legal process that relieves individuals or businesses overwhelmed by debt.
Does filing for bankruptcy eliminate alimony obligations? The short answer is no, but the details matter.
Different bankruptcy types and their impact
The effect of bankruptcy on alimony depends on the kind filed:
- Chapter 7 bankruptcy: This doesn’t discharge alimony obligations. The paying spouse must continue current and past-due alimony payments.
- Chapter 13 bankruptcy: This allows debt reorganization but requires ongoing alimony payments. Past-due alimony must be paid in full through the bankruptcy plan.
Bankruptcy courts consider alimony a priority debt, placing it above many other financial obligations.
While bankruptcy doesn’t eliminate alimony, it can affect payments indirectly:
- Asset liquidation in Chapter 7 might limit the paying spouse’s ability to meet alimony obligations.
- The bankruptcy process could cause temporary payment delays.
- Some cases might require alimony agreement modifications due to changed financial circumstances.
Bankruptcy complicates alimony payments but doesn’t erase the obligation. Both parties should prepare to tackle these challenges with professional legal guidance to ensure a fair and lawful resolution.
If you need help in changing the specifics of your alimony payments due to pending or existing bankruptcy, consider speaking to a local divorce attorney. They’ll explain your rights and obligations under divorce and bankruptcy laws, helping you manage these intertwined legal and financial matters.