Alimony in Solido After Former TN Spouse’s Chapter 7 Bankruptcy

Alimony in Solido After Former TN Spouse’s Chapter 7 Bankruptcy

“NO! We just got divorced and he’s already broke?”

Those may very well be the first words spoken when a former spouse’s bankruptcy notice arrives in your mailbox. Take heart. Not all is lost.

Your ex-husband or ex-wife may be asking the bankruptcy court for a full discharge, but some obligations resulting from the divorce are not dischargeable in a Chapter 7. In a previous post, we touched on domestic support obligations (DSOs) as nondischargeable debts in bankruptcy. But what about your Alimony in Solido  award?

Impact of Chapter 7 Bankruptcy on Alimony in Solido

Alimony in Solido may be awarded to serve two separate functions: (a) to provide spousal support; and, (b) to equalize the property division. The first function of lump sum alimony, to support a spouse or former spouse, is clearly a nondischargeable DSO in the Chapter 7 liquidation. But what about the second function of lump sum alimony?

How does the federal bankruptcy court handle alimony in solido awarded in the divorce for the specific purpose of equalizing the parties’ property division?

First of all, just because an agreement, order, or award is labeled “alimony” does not ensure that the bankruptcy court will deem it to be spousal support. The bankruptcy court will determine whether the award is for support based on the substance and structure of the Tennessee court’s award.

Second, prior to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which became law in October 2005, an order to pay a former spouse a sum as part of the equitable division of their property could be discharged in Chapter 7 – a write-off for the debtor-spouse. Although it would help the recipient financially, “property division” was not considered to be “spousal support.”

After BAPCPA, 11 U.S.C. § 523(a)(15) did away with the distinction between the two following a divorce or legal separation. Today, a Chapter 7 discharge does not eliminate a debt to any spouse or former spouse when that obligation was incurred by the bankrupt debtor in the course of a divorce or legal separation, or “in connection with a separation agreement, divorce decree or other order of a court of record.” Generally, that makes the equalizing payment portion of the alimony in solido award a debt that would not be discharged in Chapter 7 under ordinary circumstances.

The coincidence of bankruptcy and divorce can raise many complex issues and there may be much at stake. If your ex-spouse has already filed, consider meeting with a bankruptcy lawyer for specific bankruptcy advice to protect your interests as a creditor.

Did you or your former spouse file for Chapter 7 Bankruptcy right after the divorce was final? Leave a comment!

More About Tennessee Alimony

To learn more about alimony in divorce, read Tennessee Alimony Law in Divorce | Answers to FAQs. Also, for legal updates, news, analysis, and commentary, see our Tennessee Family Law Blog and its Alimony category. A Memphis divorce lawyer from the Miles Mason Family Law Group can help. To schedule your confidential consultation, call us today at (901) 683-1850.