Tennessee residents who are preparing to file for Chapter 13 bankruptcy and who owe domestic support obligations may want to know about a decision out of the U.S. Court of Appeals for the 7th Circuit. The case involved a debtor who was ordered to pay $25,000 to his ex-wife’s lawyer in a divorce case. The appeals court found that it was a domestic support obligation and thus not dischargeable in bankruptcy.
In the case, a man and his ex-wife engaged in protracted litigation in state court in their divorce. They shared joint custody of their six children. The family court ordered the man to pay his ex-wife’s attorney her attorney’s fees because the man had engaged in what the court called overlitigation. The man did not pay the attorney and filed for Chapter 13 bankruptcy protection.
The attorney filed a claim with the bankruptcy court that the order was a domestic support obligation, which would make it a priority debt and one that could not be discharged. A district court ruled that it was a domestic support obligation, and the man appealed. On appeal, he argued that it couldn’t be because it was payable to the attorney and not his ex-wife. He also argued that it was ordered as a punishment and was not in the nature of support. The court ruled against him, finding that it was support and that the man didn’t raise the payee argument at the trial
Chapter 13 bankruptcy can offer debtors a fresh financial start by giving them a longer period of time to repay some of their debts. Some debts are not dischargeable in bankruptcy and must be paid in full during the repayment plan period. A bankruptcy attorney might advise his or her client about which debts are priority debts and which are not.