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December 30, 2017 Lawrence 'D' Pew

Does Bankruptcy Negate Alimony?

Alimony payments, also known as “spousal support” is often paid after a divorce by the spouse who earns substantially more money than the other person to whom he or she has been married for several years. Courts rarely award alimony in marriages that have ended quickly or in cases where both spouses earn almost equal income. Alimony payments are typically worked into your separation agreement by your divorce lawyer and are paid monthly on a date set by the court. The payments are made until the recipient remarries or if your children are grown.

Alimony and Bankruptcy Discharge

Our Arizona bankruptcy lawyers are often asked the question if filing for bankruptcy protection will make alimony payments go away. For starters, when you file for bankruptcy in Arizona, that action places an automatic stay on any collections. This means that creditors can no longer call you and harass you about your debts when the bankruptcy proceedings are going on. They cannot bring lawsuits or file any other type of legal action against you for not making payments on your debts.

However, this automatic stay will not apply to domestic support disputes such as alimony or child support payments. Getting alimony or spousal support payments discharged in a bankruptcy is no mean task. Under the Bankruptcy Code Section 523 (a)(5), alimony payments and debts are not dischargeable by filing bankruptcy. The supported spouse is considered to be a creditor under the bankruptcy proceeding.

Under the law, alimony payments are owed to a spouse, a former spouse or a child and the details of the alimony are typically spelled out by a separation agreement, divorce decree or other types of agreement or court order. That said you might still have a few options to deal with your alimony issues.

What Options Do You Have?

Regardless of what your options are, it is critical that you list the alimony and support the spouse in your bankruptcy petition. A failure to do so will make it almost impossible to discharge this type of debt because courts cannot erase debt that is not listed in a bankruptcy petition.

While alimony cannot typically be erased with a bankruptcy proceeding, there are two exceptions. First, if that alimony debt was legally assigned or transferred to another person by the spouse who is supported, the alimony debt could be erased. Secondly, your alimony debt could also be discharged if the recipient of the payments wrongly interprets a portion of the settlement as alimony.

The bankruptcy judge may change your alimony payments if you can show that it significantly affects your financial position. A bankruptcy may also affect your ability to pay spousal support. The court will take into consideration a number of factors including your earning capacity, cash flow, income, assets and standard of living.

If you are planning on filing for bankruptcy it is critical that you consult an experienced Arizona bankruptcy lawyer to help understand your legal rights and options. The laws surrounding bankruptcy and divorce can be complex and intimidating. You need a knowledgeable lawyer who can help you navigate the process and achieve the best possible outcome in your case.

Call (480) 745-1770 or fill out our contact form to get help from compassionate professionals. Stop worry and get help today.