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How bankruptcy courts determine when a marital debt is a domestic support obligation

by Dorota Trzeciecka on November 20th, 2016

When a former spouse files bankruptcy in an attempt to discharge a marital debt, the other former spouse becomes a creditor in that spouse’s bankruptcy case.   Being a creditor in bankruptcy comes with the right of filing a claim and objecting to dischargeabilty of the marital debt.  The bankruptcy court then determines whether the debt is in the nature of support and maintenance, or a dischargeable equitable distribution, sometimes also called a property settlement.  The court makes such determination on case-by-case basis.  While the property settlement can be limited and discharged in Chapter 13 bankruptcy, the domestic support obligation cannot.  In determining whether a marital debt is a domestic support obligation, and therefore not dischargeable, bankruptcy court is not bound by the labels that the parties have assigned to the particular obligation in the divorce settlement agreement.  If it were the parties’ intention to create a domestic support obligation, it does not matter what they called it in the agreement.  The court may examine the agreement, parties’ testimony, and determine the intention of the parties at the time of the making of the agreement through the relevant evidence presented.  Such proceeding may come before the court during an evidentiary hearing upon former spouses objection the claim, or in a separate adversary proceeding.