Are alimony debts and payments discharged in bankruptcy?
Alimony, otherwise known as spousal support, are payments to an ex-spouse after a marriage has been dissolved. In Pennsylvania there is no automatic alimony and it must be ordered by the courts or negotiated.
Chapter 7 or Chapter 13 debts can be completely eliminated in some instances. The debts that may be wiped out can include dischargeable debts, such as medical or utility bills. However, there are also non-dischargeable debts that cannot be wiped out and those include some forms of taxes, student loans and alimony.
However, there is an exception to this rule found under Section 523 of the U.S. Bankruptcy Code. The federal bankruptcy law outlines two situations in which alimony may be discharged. Those situations are:
- Third party involvement – If a third person is involved in the alimony arrangements. An example would be if the ex-husband was paying his former spouse’s daughter and the daughter then gave the money to the ex-wife. If a situation like that exists, then the alimony debts may be wiped out.
- Incorrect alimony classification – The divorce decree covers alimony, but it may not cover it correctly. For example, if an ex-spouse makes payments to a business affiliated with the other ex-spouse. Despite the fact they are called alimony, the payments do not address domestic support –the usual interpretation of alimony –and despite what they are called, they may be discharged.