What is a DSO (Domestic Support Obligation)?
Section 101(14A) of the Bankruptcy Code defines a domestic support obligation as “a debt that accrues before, on, or after the date of the order for relief . . . including interest that accrues on that debt as provided under applicable non-bankruptcy law . . that is –
A. owed to or recoverable by –
i. A spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible relative; or
ii. a governmental unit;
B. in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child’s parent, without regard to whether such debt is expressly so designated.
C. Established or subject to establishment before, on, or after the date of the order for relief . . . by reason of applicable provisions of –
i. a separation agreement, divorce decree, or property settlement agreement;
ii. an order of a court of record; or
iii. a determination made in accordance with applicable non-bankruptcy law by a governmental unit; and
D. not assigned to a governmental entity, unless that obligation is assigned voluntarily by the spouse, former spouse, child of the debtor, or such child’s parent, legal guardian, or responsible relative for the purpose of collecting the debt.
Section 523(a) states that “a discharge under §727, 1141, 1228(a), or 1328(b) . . . does not discharge an individual debtor from any debt for a domestic support obligation.
BUT - What if my client’s ex-spouse was awarded a payment that is not child support or spousal support but it was incurred during the divorce?
If it is not a DSO, is it still a nondischargeable debt under § 523(a)(15)?
§523(a) (15) states that “a discharge under §727, 1141, 1228(a), or 1328(b) . . . does not discharge an individual debtor from any debt to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record or, a determination made in accordance with State or territorial law by a governmental unit.
§ 1328(a)(2) allows an individual to discharge the kind of debts specified in § 523(a)(15) under certain conditions:
2. The individual is current on ongoing child support or spousal support payments and has brought current any arrearages owed before filing the chapter 13 case
How do we know if it is a 523(a)(15) debt?
The Bankruptcy Court in In re Starnes looked at the “function the award was intended to serve” citing In re Phegley, 443 B.R. at 157 (citing Adams v. Zentz, 963 F.2d 197, 200 (8th Cir. 1992).
Judge Ben T. Barry wrote the opinion in In re Starnes denying the Complaint to Determine Dischargeability filed by the debtor’s ex-spouse, stating “that the function of the payments the debtor was ordered to make to [his ex-spouse] were intended to balance the division of property between the debtor and [his ex-spouse] . . . (not intended to take the place of domestic support obligation) . . . the debtor’s obligation to pay the debt on the Dodge Charger is in the nature of a property settlement agreement (not in the nature of child support or alimony) and (is) dischargeable in the debtor’s chapter 13 bankruptcy case upon completion of the debtor’s obligation under a confirmed plan.” In re Starnes, Bankr. W.D. AR 2017.
How can I be sure?
Read your divorce decree carefully and talk with your divorce attorney about whether you should consult with a bankruptcy lawyer or not. Your divorce attorney represents you and will know whether you should consult with a lawyer specializing in consumer and domestic-relations debts.