Dischargeability of debt is one of the core principles in bankruptcy law, and it plays a large part in the “fresh start” for debtors. Discharge cancels debt and stops collection activity for the discharged debt. There are a variety of debts that are not dischargeable in bankruptcy, including alimony and child support.
Under Section 523 of the Bankruptcy Code, the first requirement for barring bankruptcy discharge of an alimony or support obligation is that the obligation must have accrued in connection with a separation agreement, divorce decree, or other court order. In addition, the obligation must actually be in the nature of alimony, maintenance, or support. Finally, the obligation must not have been allocated to another entity, although certain minor exceptions are permitted. An important point is that alimony, support, and maintenance are excepted from the general discharge automatically unless the debtor brings an adversary proceeding in bankruptcy court to challenge nondischargeability.
Under the recent Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), effective October 2005, “domestic support” was added to the Bankruptcy Code as a new debt term. This form of debt includes money owed for child support, alimony, or a money obligation incurred in the course of a divorce or separation agreement. Under the Bankruptcy Code, domestic support obligations are not dischargeable in Chapter 7, and may be relieved in Chapter 13 only under certain conditions.
The Bankruptcy Code governs the determination of dischargeability as a matter of federal law. The determination of whether the support obligation is in the nature of alimony, maintenance, or support requires the application and/or interpretation of the law of the state where the support order was entered. Such matters can become more complicated when the divorce decree and support order are issued in one state, and the bankruptcy case arises in a different state.