Domestic Support Obligations (DSOs)
Child support and spousal support are often referred to as domestic support obligations, or DSOs. Many individuals who file bankruptcy have a DSO, so this is a common topic of concern. First and foremost, domestic support obligations are not dischargeable. Debtors cannot get rid of any amount of child support, spousal support, or arrearages related to a domestic support obligation by filing bankruptcy.
If you owe a co-parent or ex-spouse a support arrearage, that person is considered a priority creditor in the eyes of the Bankruptcy Court. This means they must be included in your list of creditors to get notice of the bankruptcy filing. However, that does not mean your debt to them is cleared. It may be a good idea to have a conversation with them about this before they receive notice from the court, as it is often a sensitive subject and they may not understand what it means.
How does bankruptcy benefit me if it doesn’t get rid of the support arrearage that I owe?
Bankruptcy absolutely does not clear you of child support or spousal support debt, but it can make payment of the debt less demanding. Chances are, if you are at the point where bankruptcy is a viable option, you have had trouble staying current on one (or several) of the following:
- Medical bills
- Payday loans
- Credit card bills
- Bank loans
- Old utility/cell phone bills
Filing chapter 7 bankruptcy will eliminate these debts, which can create more room in your budget to catch up on any support obligations.
Additionally, if you file a chapter 7 bankruptcy and your case has an asset that is not exempt, after covering Trustee’s costs, any money from that liquidated asset goes to DSO recipients first. If you file a chapter 13 bankruptcy, you and your attorney will make a feasible 3-5 year plan to pay all past-due child support. In chapter 13, support payments are consolidated with other debt and you make one payment to a trustee who disburses those payments on your behalf.
All in all, even though DSO debts are not dischargeable, filing bankruptcy could still give you the fresh start you need and enable you to pay off support obligations sooner. For more information, call our office to schedule a free consultation.