Tag Archives: debt

Bankruptcy, Maintenance, and Child Support

bankruptcy, Wheaton divorce attorneysIn this day and age, bankruptcy has become more common than it used to be, unfortunately, and as such, more and more people are encountering issues with other obligations that are directly related to bankruptcy. While many believe that a bankruptcy will essentially wipe out all their debt, what they do not know is that certain obligations are specifically exempted from this, and must still be paid regardless of any financial issues.

Spousal Maintenance

While it is not mandatory, a large number of divorce cases in Illinois assign maintenance rights to one spouse or the other. In Illinois, this obligation is specified to last a certain period of time, but if the obligor—the spouse who is paying support—must file for bankruptcy, it is reasonable to look into the possibility of modification. However, the key word is modification. Under the U.S. Internal Revenue Code, maintenance or alimony obligations are not considered dischargeable. In other words, any debts that are of this nature will not be simply erased, as other debts might be in a Chapter 7 bankruptcy.

There are select situations in which you may be able to change or write off a debt of spousal support, but they are rare and involve the assignment of the debt to someone other than the recipient spouse. U.S. tax code holds that maintenance is not dischargeable because it is what is referred to as an obligation of support, but once the debt is assigned, it can no longer be said to support the spouse. Generally, even if you declare bankruptcy, you will still be on the proverbial hook for spousal support in Illinois. However, this does not preclude you from attempting to deal with the issue directly and asking your spouse—or a family court—for a modification due to your struggling finances.

Child Support

Child support obligations are almost never dischargeable. The U.S. Bankruptcy Code states explicitly that “domestic support obligations” are not dischargeable, and child support falls under this category. There is sometimes confusion on this score because if you file Chapter 13, any child support arrearages do come under the aegis of the Chapter 13 plan, but this does not mean these debts are dischargeable. It merely means that under a Chapter 13 repayment plan, the arrearages will be part of that plan.

In most cases, debt relating to the care of your children is less likely to be dischargeable than if it were incurred on your own behalf. A common example is medical care. For example, if your child requires significant medical care, a court is more likely to deem such costs as domestic support obligations, especially if these costs are foreseeable. The state of Illinois holds that child support and all its attendant expenses are due to the child, not to your ex-spouse, and as such, treats attempts to avoid payment quite seriously.

Seek Experienced Legal Assistance

Dealing with bankruptcy is very complex at the best of times, and trying to deal with one while in the midst of a divorce can be too much for any one person to bear. If you are face such a situation, contact an experienced DuPage County family law attorney for assistance. Call 630-871-1002 for a free consultation at any of our three convenient office locations.




Marital Debt and Bankruptcy

bankruptcy, Wheaton divorce attorneysIf you or your spouse ends up in the unenviable position of having to file for both bankruptcy and divorce, it is imperative that you both understand the laws surrounding marital debts and bankruptcy. Many couples make assumptions and then react strongly when their carefully constructed asset division proposal collapses on itself. By educating yourself, you and your spouse can work to avoid such a fate.

Bankruptcy First?

One of the biggest questions regarding asset division, but especially marital debt, is whether to file for bankruptcy before divorce or vice versa. The general rule is that it depends on each spouse’s individual finances, and which type of bankruptcy would be filed. However, in most cases, filing beforehand tends to streamline the divorce process, while filing afterward or concurrently can cause a divorce to drag on. This is especially true if you or your spouse would be filing a Chapter 7 bankruptcy, either jointly or individually. In a Chapter 7, all debts are eliminated or written off, as opposed to in other types of bankruptcy where restructuring is more common.

If one files for Chapter 7 bankruptcy before divorce, a significant amount of debt will likely be off the table, which means it does not have to be taken into account during property division in the divorce. This can cut down on time spent, and correspondingly, on attorney fees. However, some do choose to file for divorce first, either out of a misguided belief that they can then get out of paying spousal support, or because they want to safeguard a specific asset. This can have decidedly mixed outcomes.

Beware of Creditors

Perhaps the most egregious mistake that many couples make is believing that their divorce decree is binding on every actor that may have business with their marriage. The divorce decree does not bind your creditors. If your spouse is assigned responsibility for a debt, but defaults or files for bankruptcy (Chapter 7 or 13), that creditor may attempt to collect from you, regardless of whether or not your divorce decree absolved you of the responsibility to pay. Bankruptcy law requires that once a debtor has filed for bankruptcy, all creditors must cease all communication with that person. It says nothing about ceasing communication with a spouse or other co-signer.

Be advised, however, that barring certain very rare exceptions, bankruptcy law does not allow you to shake some creditors, if you are in the position to be on the proverbial hook: your spouse and/or children. 11 USC § 523 states specifically that spousal maintenance and child support are explicitly not dischargeable in bankruptcy unless it is absolutely impossible for the debtor to both pay and support themselves in a semi-decent style, and this is extremely difficult to prove. While bankruptcy will wipe out some of your marital debt, it will not clear the slate completely.

Need Help Understanding Bankruptcy & Divorce?

If you have been unfortunate enough to have to confront both bankruptcy and divorce at the same time, you need a knowledgeable attorney who will fight for you. Our passionate DuPage County divorce attorneys can help advise you as to the best path for you, your family and your finances. Contact our offices today to set up a free initial consultation.




Family Debt Can Impact Well-Being of Children

debt, DuPage County family law attorneyFinancial debt is a major cause for concern around the United States, at the individual and family levels, as well as on collective scale. Families fractured by divorce or other type of similar stresses may be particular susceptible to growing debt, as financial obligations may be harder to meet on a single income, combined with a countless other contributing factors. However, a recently-published study suggests that parents with certain types of debt may place their children at increased risk for behavioral problems in the future.

Quality of Life Connections

The study was conducted by researchers at the Institute for Research on Poverty at the University of Wisconsin-Madison and looked at data from more than 9,000 children and their mothers over a period of nearly 40 years. The research also categorized debt into four distinct types: home, education, automobile, and unsecured debt, which included credit cards, certain loans, and medical debt. Looking for possible connections, the team also examined the socio-emotional health and behavioral concerns of the participating children.

According to the study’s findings, while larger amounts of total debt was associated with poorer behavior, home- and education-related debt were correlated with higher degrees of emotional health. Unsecured debt, conversely, was “associated with lower levels of, and declines in child socioemotional well-being.”

Possible Conclusions

It would seem, at least among studied participants, that all debt is not necessarily harmful. It may cause some levels of uncertainty and economic stress, but obligations that allow parent to better their lives through home-ownership or education pay off over time. The limited financial resources often associated with medical debts and higher credit card balances appear to have a much stronger negative impact on children.

Keep Finances Away from the Children

There was no dollar amount or percentage found to be a tipping point for negative behavior among children of parents with debt, so the study’s findings reflected a more general observation of the overall trend. In a similar vein, experts recommend keeping financial discussions behind closed doors and not to fight about money in front of your children. Whether you are currently married or continue to have financial concerns as you attempt to work together with your child’s other parent after divorce. Most children are not equipped to understand these type of fights, and may have a tendency to internalize the conflict.

If financial issues have you wondering if you truly providing for the best interests of your children, or are pushing you and your spouse closer to divorce, you need the assistance of an experienced DuPage County family law attorney. Call our office today at 630-871-1002 to schedule your free introductory consultation. Let us help you put your life back on track.