Chapter 7 Success Lawyers Chicago - Domestic Support Obligation

Domestic Support Obligation

Under prior law, a key concept was “alimony, maintenance and support” owed to a “spouse, former spouse or child of the debtor” and “not assigned to another entity, whether voluntarily, involuntarily or by operation of law.” To constitute “alimony, maintenance or support,” the obligation had to be in the nature of support as opposed to a property settlement debt or obligation. Support debts assigned pursuant to §408(a)(3) of the Social Security Act (primarily related to Aid to Families with Dependent Children) or otherwise assigned to a governmental unit were excepted from this anti-assignment language and were accorded the enhanced protections support debts enjoyed.

The 2005 amendments continue to distinguish between support debts on one hand, and property settlement debts on the other. However, the amendments clarify and broaden the concept of “alimony, maintenance and support” by introducing a new term, “domestic support obligation” (DSO) and referring to it consistently throughout the amended Code. An obligation must be in the nature of support to constitute a DSO. That term includes both pre-petition and post-petition alimony and support as well as interest under applicable non-bankruptcy case is commenced. In addition to obligations owed to the debtor’s spouse, former spouse or child, or assigned to governmental units as described above, a DSO includes debts owed to the child’s parent, legal guardian or responsible relative, as well as governmental and nongovernmental units if voluntarily assigned for purposes of collection. §101(14A)

The 2005 amendments make many important changes to enhance enforcement of domestic relations rights and responsibilities. Domestic relations creditors get broad immunities from the automat6ic stay, discussed in detail in Chapter VI. In addition, the amendments establish a comprehensive set of provisions to enhance the enforcement and collection of DSOs even while the bankruptcy case is pending. First, all DSOs will have first-priority status. However, within that first-priority category, highest priority goes to a trustee’s administrative expenses in finding and liquidating assets to pay DSOs. Second, failure to make ongoing DSO payments is a ground for conversion or dismissal in chapters 11, 12 and 13. Third, plans under chapters 11, 12 and 13 and can be confirmed only if they propose full payment of pre-petition DSO claims entitled to first priority. Fourth, such plans can be confirmed only if the debtor is current on post-filing DSO payments. Fifth, the court may not grant a discharge in chapter 11, 12 or 13 unless the debtor certifies that the debtor is current in all post-petition DSO payments and has made all DSO claimants about the resources available to them to collect their claims and of their rights under the Code. For good or ill, the bankruptcy court has become an important conduit in the enforcement and collection of support obligations.

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