Divorce is often the source of financial difficulty, as people have to split their assets and savings while simultaneously incurring substantial expenses from their personal attorney and the courts. Beyond that, there is the potential financial impact of the requirement to pay child support and spousal support, also known as maintenance or alimony.
When you already have a tight budget, needing to send a couple hundred dollars a month to your ex or your kids can make it impossible for you to cover all of your costs. As the debt you have to worry about begins to increase, you may find yourself considering bankruptcy as a way to alleviate the pressure from creditors. Understanding the limits of bankruptcy for divorced parents is important.
Bankruptcy doesn't free you from priority debts
Given that bankruptcy offers people immediate relief through an automatic stay, it can be an excellent way to take control of your financial circumstances when your unsecured debt has risen to difficult or unsustainable levels. However, not all debt can be part of your discharge in a Chapter 7 or 13 personal bankruptcy.
Priority debts are not eligible for discharge. Those priority debts can include tax debts and court-ordered payments, including child support and alimony payments. While bankruptcy can help you free up more of your income to meet your child support obligations each month, filing bankruptcy will not relieve you of the obligation to pay child support or help you discharge any unpaid, back owed child support.
You may be able to negotiate repayment on outstanding amounts
The creditor meeting during bankruptcy allows those in debt an opportunity to talk about their outstanding debt with their lenders and potentially negotiate a solution that works for both parties. Some lenders will forgive certain fees, while others will reduce the total amount owed.
While the state of Virginia will not simply forgive outstanding debt because you ask it to, it may be possible to negotiate a more reasonable, long-term repayment for amounts that remain owed and outstanding. If you have gone several months without making full child support payments, the amount you must pay could be high. Finding a way to pay it off a little at a time without increasing your risk of enforcement actions could provide much needed peace of mind.
Too many people make mistakes about how or when they file for bankruptcy because they have heard and believe popular bankruptcy myths. Although bankruptcy does not allow you to discharge your priority debts, such as alimony or child support, it does create a situation where you may be able to take control of your financial circumstances.