Domestic Support Obligations, Part 2--Protecting Support Creditors in Bankruptcy. What's in a Name?


Previously in Part 1, we discussed Arizona's rising bankruptcy filings and the prioritization of domestic support obligations (DSOs) in personal bankruptcy. DSOs include both child support and spousal support.

In today's struggling economy, there is nothing novel about someone filing for bankruptcy relief. On the one hand, a petitioner may hope to be discharged of as many debts as possible so that sufficient funds remain available to pay support obligations. On the other hand, a petitioner may hope to avoid support obligations by filing for bankruptcy protection.

Although distinct differences exist between Chapter 7, 11, and 13 filings, here's the basic rule under 11 U.S.C. § 523(a)(5,15) of the Bankruptcy Code:  spousal maintenance and child support are not dischargeable in bankruptcy.

?In the 2008 decision In re Wallace, Arizona bankruptcy Judge James M. Marlar analyzed a DSO claim in an adversarial proceeding initiated by the plaintiff ex-wife. Here are the essential facts of that case...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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