The “A” in Bankruptcy Alphabet is for “Alimony”

By Christopher C. Carr, Esq., Chester County Bankruptcy Lawyer

Tel: 610-380-7969 Email: cccarresq@aol.com Web: westchesterbankruptcyattorney.org

One of the most disturbing changes in the Bankruptcy Code* enacted by Congress in 2005 for persons getting divorces and contracting marital debts is Section 523 (a) which states in effect that an alimony, support or maintenance obligation to an ex-spouse cannot be discharged in bankruptcy, but must be paid in full, with two limited exceptions:

If a divorce decree specifies that an obligation to a spouse is alimony, but the obligation is not actually in the nature of alimony, then the obligation can be discharged in bankruptcy.

For example, Joe Dentist and Mary Dentist enter into a divorce decree which states that Joe Dentist is to pay a marital debt to The Joe Dentist and Mary Dentist Professional Corporation, where both practice dentistry, and further specifies that the husband’s payment of the debt shall be treated as alimony. Joe Dentist may nonetheless be able to have this debt discharged in bankruptcy even though the divorce decree indicates that the payment of the debt is “alimony”, because such payments can be characterized as a capital contribution to the Professional Corporation and not as alimony.

2. Also, an ex-spouse may be able to discharge an alimony obligation if it has been assigned to a third party.

For example, suppose John and Mary Jones divorce. John Jones is ordered to pay Mary Jones alimony of $1,500.00 per month. John does not pay the alimony and Mary, who needs the money, assigns the right to collect alimony to her brother, Crusher Jones, who owns a profitable Junk Yard and feels the urge to pummel John. Crusher now gives Mary the $1,500.00 each and every month. Crusher now owns the right to collect the alimony from John. But John can escape the debt (if not the pummeling). The alimony obligation can be discharged under Section 523 since it has been voluntarily assigned by Mary.

*The United States Bankruptcy Code (Title 11 of the United States Code) states in Section 523 that:

(a) A discharge under Section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt . . . (5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, determination made in accordance with State or territorial law by a governmental unit, or property settlement agreement, but not to the extent that (A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise (other than debts assigned pursuant to § 402(a)(26) of the Social Security Act, or any such debt which has been assigned to the Federal Government or to a State or any political subdivision of such State); or

(B) such debt includes a liability designation as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance or support . . . .

(enphasis added).

Law Offices of Christopher C. Carr, MBA, P.C., is a quality bankruptcy and debt relief practice, located in Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester, Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at cccarresq@aol.com today!

I also provide Mortgage Mod Services .

For other articles on the letter A in the bankruptcy alphabet series, click here.

Other attorneys playing their “Bankruptcy A Game” include:

A is for Contract Assumption

A is for Adversary Proceeding

A is for Automatic Stay

A is for Automobiles

A is for Avoidance of Preferential Transfers