Borrowing to Pay Alimony or Child Support in Bankruptcy

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One of the non-dischargeable debts according to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) 2005 is any form of alimony and child support. These expenses take priority over other debts including taxes. So filing a bankruptcy petition will not absolve you from your obligation to pay alimony to your ex-spouse or child support for your children even after divorce.

When you file your bankruptcy petition, the bankruptcy trustee will send a bankruptcy notice in writing to your ex-spouse and to the Child Support Enforcement Agency in your state. In order to continue receiving alimony or child support, your spouse would need to file a “proof of claim” with the bankruptcy court once you file for bankruptcy. When your bankruptcy is discharged, a second notice at that time is also required by law.

Suppose you file a Chapter 13 bankruptcy petition and after paying for a period of time, you find you are struggling to keep up paying for the alimony or child support. What should you do?

If you are thinking of taking a loan to help you pay the alimony or child support, you need to inform your bankruptcy trustee to obtain his or her approval first. Generally, when you are undergoing the 3 to 5 year payment plan under Chapter 13 bankruptcy, you are not allowed any form of credit or loan. Obviously, this is to prevent the situation that led you into bankruptcy from recurring. You are required to live within your income and pay off your debts out of your income and savings.

The entire process of Chapter 13 bankruptcy may be in jeopardy if you take on new debt while paying off your existing creditors, including paying alimony or child support to your ex-spouse. So it will be highly unlikely that your bankruptcy trustee will approve of a loan to pay alimony or child support. The rationale is if you can afford to pay for a new loan, you should be able to pay more towards alimony or child support. This may result in the bankruptcy trustee increasing your Chapter 13 payments.

If you wish to file a bankruptcy petition or just want to discuss how bankruptcy can help solve your debt problems and give you a new start, call us at (813) 200 4133 for a free consultation.

 

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