How Bankruptcy Affects Alimony Payments in Pennsylvania

Needless to say, filing for bankruptcy throws a pretty major wrench into the petitioner’s financial affairs. Payment plans are drafted, creditors are contacted, the automatic stay goes into effect, and certain debts are obliterated altogether. But what about spousal support obligations? Here’s how bankruptcy affects alimony payments.

Divorce - How Bankruptcy Affects Alimony Payments in Pennsylvania

What is Alimony?

Alimony, sometimes referred to as “spousal support,” is a term for payments made to an ex-spouse following the dissolution of a marriage. Alimony payments are sometimes designed by a prenuptial agreement (commonly called a “prenup”) which is made prior to a marriage taking place. In Pennsylvania, there is no automatic entitlement to alimony. Rather, alimony must either be negotiated, or ordered by the courts.

Alimony: A Nondischargeable Form of Debt

Bankruptcy is a powerful tool — arguably the most powerful tool — when it comes to eliminating, or discharging, debts. Depending on whether the bankruptcy is Chapter 7 or Chapter 13, many debts can be completely eliminated. Utility bills and medical bills, for example, are generally eligible for partial or total elimination. However, there are certain kinds of debts which are “nondischargeable,” meaning they cannot be washed away. Debts which fall into this category typically include student loans, many kinds of taxes, child support… and alimony.

On the Discharge in Bankruptcy page of the United States Courts, a few very straightforward lines stand out: “The most common types of nondischargeable debts are… debts for spousal or child support or alimony.” This perhaps comes as disheartening news for petitioners hoping to gain financial freedom from alimony responsibilities via bankruptcy. Is there anything you can do?

Stressed Man - How Bankruptcy Affects Alimony Payments in Pennsylvania

When Alimony is Dischargeable in Bankruptcy

Section 523 of the U.S. Bankruptcy Code states that debtors cannot be released from paying domestic support obligations through bankruptcy. However, although alimony payments are usually ruled non-dischargeable under federal bankruptcy law, there are two situations which are exceptions to the rule.

1. Third Party Involvement

Alimony payments may dischargeable if a third party becomes involved in the alimony arrangements. For example, one ex-spouse may sign over the duty of alimony collection to a parent or other relative (e.g. ex-husband pays ex-wife’s mother, the mother then gives money to ex-wife). In that case, those alimony debts may become eligible for elimination.

2. Incorrect Alimony Classification

When a couple divorces, one of the most important documents of the divorce is something called a divorce decree. The divorce decree will discuss the major broad topics typically associated with divorce, such as child custody and division of property. This decree will also cover the subject of alimony — perhaps incorrectly.

For example, let’s say a divorce decree mandates that an ex-spouse make payments to a company affiliated with the other ex-spouse. While these payments are referred to as “alimony,” they have little to do with actual domestic support, and therefore, despite their (misleading) formal name, may be dischargeable.

Pennsylvania Bankruptcy Attorneys Offering Free Consultations

Filing for bankruptcy can be a daunting process, especially when elements like divorce and spousal support payments are thrown into the mix. If you are struggling with alimony and filing for bankruptcy, contact the law offices of Young, Marr & Associates to arrange a consultation and discuss your options. You can also call us at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania.

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Quakertown

328 W Broad St
Quakertown, PA 18951
Tel: (215) 515-6876
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Plymouth Meeting

600 West Germantown Pike #400
Plymouth Meeting, PA 19462
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Doylestown

44 E Court Street #100
Doylestown, PA 18901
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Marlton

10000 Lincoln Drive E, Suite 201
One Greentree Centre
Marlton, NJ 08053
Tel: (856) 213-2805
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Philadelphia

7909 Bustleton Ave, First Floor
Philadelphia, PA 19152
Tel: (215) 607-2715
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Bensalem

3554 Hulmeville Rd, #102
Bensalem, PA 19020
Tel: (215) 515-6389
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Bala Cynwyd

2 Bala Plaza, Suite 300
Bala Cynwyd, PA 19004
Tel: (610) 557-3209
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Mt. Holly

27 Cedar St
Mt. Holly, NJ 08060
Tel: (609) 796-4344
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Jenkintown

135 Old York Road
Jenkintown, PA 19046
Tel: (215) 544-3347
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Allentown

137 N 5th St, Suite A
Allentown, PA 18102
Tel: (215) 240-4082
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Easton

101 Larry Holmes Dr, #212
Easton, PA 18042
Tel: (215) 515-7077
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Hamilton Twp.

3525 Quakerbridge Rd, #903
Hamilton Township, NJ 08619
Tel: (609) 236-8649
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Piscataway

371 Hoes Lane, Suite 200
Piscataway Township, NJ 08854
Tel: (908) 367-7256
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