In 2005, Congress revised the federal Bankruptcy Code and introduced the term “domestic support obligation.” In short, a domestic support obligation, or DSO, is a debt “in the nature of alimony, maintenance, or support” that accrues before, during or after your bankruptcy case is filed and is owed to a family member or governmental unit. The DSO must be established by a separation agreement, divorce decree, property settlement agreement, or other court order. A more complete definition is found in section 101(14A) of the Bankruptcy Code.
DSO’s are not dischargeable. In many cases, the protections of the automatic stay do not apply to stop enforcement of a DSO. This means that not only will your bankruptcy not discharge your child support or alimony obligation, but you won’t even get a temporary break from an enforcement action, like a garnishment or contempt citation. Enforcement of a DSO is temporarily stayed if the collector attempts to take property of the bankruptcy estate to satisfy the DSO. For instance, future wages during a Chapter 13 bankruptcy are property of the bankruptcy estate and are protected.
For Chapter 7 debtors, virtually all property divisions and DSO’s in connection with the debtor’s divorce are non-dischargeable obligations. Courts have found that debts and obligations are no longer dischargeable by virtue of arising out of a divorce proceeding, including, but not limited to: property equalization and equitable distribution payments; lump sum distributions and payments; credit card and charge account obligations; mortgage and HELOC payments; homeowner’s association dues; income tax obligations; automobile loan payments; indemnification and hold harmless obligations; medical bills; attorneys’ fee obligations between the spouses incurred in matters unrelated to the divorce; and sanctions awarded for contemptuous conduct.
For Chapter 13 debtors, some obligations and debts arising out of a separation or divorce, including property settlements, are dischargeable in a Ch. 13 proceeding. It is important to discuss with your attorney the specific debts that were included in your divorce. In some cases filing a Chapter 13 offer temporary relief and an opportunity to pay DSO obligations over time, or discharge marital settlement obligations at the end of your case. Speak with an experienced bankruptcy attorney and discuss your options.