The pitfalls of Alimony
Video Transcribed: Edward Kelley here at 1-88 Debt Line, answering your bankruptcy questions. We’re well into our series on bankruptcy and divorce, and we’re in the middle of the pitfalls that you need to watch out for. Again, bankruptcy is a wonderful tool to use if you’re getting along with your partner and during the process of divorce, you can work together to take care of your debt before you end your marital union. You can certainly start off on a much better foot.
But here’s some things, again, you need to watch out for. So, I thought of something after our last series. I talked about divorce decrees and how you need to watch out. If you are assigned a debt in a divorce decree, you are still responsible to your ex-spouse for that debt, regardless of whether you’ve discharged it in bankruptcy. And I’ve seen this cause problems time and time again.
Another thing you need to understand is that alimony is not going to be dischargeable under any normal circumstances. So don’t think that if you’re awarded alimony, particularly support alimony, that you’re going to be able to get out of that. Also child support, completely unaffected by anything in bankruptcy, whether that’s through a marriage and a divorce, or whether that’s ordered by a divorce court, or ordered by DHS directly, Department of Human Services, Child Support Enforcement Division, or whether that’s through a paternity case in the district court, which is when you’re not married but you have a child together, child support absolutely can’t be touched, nor can arrearage.
So if you’re looking at a divorce decree and thinking you’re going to get out of those things, you’re definitely not. I think most people understand that on child support, but it seems like people have a little bit less understanding of that in alimony, although that can be useful as an expense if it has been properly ordered.
So, those are some more pitfalls to watch out for. Also, another thing you really need to watch out for, and this is mainly what this edition is going to be about, is property settlement. Let’s say you’re divorcing and you file together for bankruptcy, but there are assets. Some people think they can pull a fast one by intimating to the trustee that the other person is going to get certain property. Well, that is not the way it works. So if you are in a bankruptcy and your spouse is not, and in many cases, the trustee will hold the case open to see what property you might be awarded.
So let’s say, and this’ll happen a lot with people who receive alimony, and this is a critical thing you need to go over with your attorney. Support alimony, now this is alimony that is awarded solely based on need, lifestyle accustomed to, it’s not in lieu of a property settlement. That support alimony will not be taken by the trustee. You’re okay on that if you have that asset coming, although if it’s already been awarded or it’s reasonably expected to be a certain amount, that needs to be listed as income.
If it hasn’t come yet, not on the means test but possibly on I and J and from district to district, that’ll actually vary on both. But the other kind of alimony is in lieu of property settlement. And usually, a good attorney will spell that out one way or the other in the decree very clearly because if you don’t, you may have a trustee digging in there and finding that something isn’t support, even if it was meant to be, if it’s not clear what it was. So you’ll want support alimony to be called support. If you have a divorce going on, make sure it’s called support alimony, not intended to be alimony in lieu of property settlement. Literally that specific so there is no question.
Because alimony in lieu of property settlement means exactly what it says. You’re going to be paid a monthly amount, in lieu of being given property that you are entitled to by virtue of the common efforts of the marriage. So in that case, you’re basically being given an asset in installments. It’s not for your support because you already owned it, and thus, it’s an asset that can be taken by the bankruptcy court. So, be careful.
Another big pitfall. If you’re in a divorce and you’re expecting some kind of property settlement, don’t think just because you haven’t got it, that it’s going to be protected or will survive. The bankruptcy trustees always dive into those divorce decrees and certainly pour over the provisions of any sort of alimony award.
So, that’s it for this edition of 1-88 Debt Line. As always, you can contact me at number or email me at edward@wirthlawoffice.