Alimony and Support Claims
Filing for bankruptcy does not suspend or stop the obligation to pay child support or alimony. Whether an obligation imposed by a divorce decree is dischargeable depends on whether it is characterized as support or as a property settlement. In many instances, obligations for property settlement can be discharged in bankruptcy, while obligations for child support and alimony cannot be discharged in bankruptcy. Bankruptcy law, not state law, determines whether an obligation is a support obligation or a property settlement obligation.
Chapter 12 Discharge
Upon successful completion of all payments under a chapter 12 plan, the debtor will receive a “discharge” which extinguishes the debtor’s obligation to pay any unsecured debts that were included in the plan, even though they may not have been paid in full. After the discharge has been granted, those creditors whose claims were provided for in full or in part under the plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.
Dischargeability of Debt
Discharging a debt in bankruptcy means that the debt is eliminated or wiped out. However, not all types of debts can be discharged in a bankruptcy proceeding.
Treatment of Property Settlement Claims
Certain property settlements are not dischargeable in a Chapter 7, 11 or 12 bankruptcy case, but remain dischargeable in Chapter 13 cases. Support, alimony or maintenance 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 are generally not dischargeable.
Turnover to the Trustee
The Bankruptcy Code requires an entity in possession, custody, or control of property of the estate, including exempt property, to deliver that property to the trustee, unless the property is of inconsequential value to the estate.