You have a Domestic Support Obligation (DSO) and now you have to file for bankruptcy to gain the “fresh Start” after your divorce.  How does the bankruptcy court handle DSO’s?  These debts are not ordinary debts  they are for the support of your children or former spouse and therefore are not treated as a typical unsecured debt in a bankruptcy.  In fact DOS’s are not considered a debt but as an obligation and are treated as such by the bankruptcy court. 

The bankruptcy Code defines Domestic Support Obligation as a debt which is “in the nature of alimony, maintenance, or support …”  The DSO must be “owed to or recoverable by” the debtor’s spouse, former spouse, or child” the “child’s parent, legal guardian, or responsible relative”, or “governmental unit, such as a child support enforcement agency or the Department of Jobs and Family Services.  The DSO includes interest and may included attorney fees incurred in connection with the DSO.

A DSO in bankruptcy can only be established by a court order or administrative order establishing the DSO.  If the debtor simply has an agreement to pay for the care of their child or former spouse that has not been made into a court order or administrative order then that obligation, whether being paid or no, is not treated as a DSO in bankruptcy. 

Normally when a debtor files for bankruptcy an automatic stay is put in place against collection efforts by creditors seeking payment on the debts of the debtor.  Domestic Support Obligation collection may continue in some cases despite the automatic stay.  Some collection efforts that are NOT stayed in relation to a DSO are

Civil actions for establishing paternity, establishing or modifying a DSO, collection of a DSO from non-estate property, income withholding orders for a DSO, suspension of a license for failure to pay a DSO, reporting overdue support of a DSO to a consumer reporting agency, intercepting tax refunds for a DSO, and enforcement of a medical obligation under a DSO. 

In a chapter 7 bankruptcy the payment from any assets of the debtor that are not exempt under the exemption statutes applied are generally the highest priority.  This is true even if there are not enough non-exempt assets to pay the Domestic Support Obligation obligation in full.  Further, DSO’s in a chapter 7 are non-dischargeable.  The chapter 7 filing may help the debtor in that the other debts that are dischargeable shall be removed leaving more disposable income to pay the DSO after the bankruptcy discharge. 

In a chapter 13 bankruptcy the collection of the DSO payments can continue uninterrupted from the debtor regardless of the automatic stay.  The DSO must be accounted for and treated to be paid uninterrupted through the chapter 13 plan for the term of the plan or until the DSO expires.  If the debtor is in arrears when the chapter 13 is filed the arrearages have to be paid in full during the plan term.  If the debtor has not remained current on the post-filing DSO payments but has otherwise satisfied the obligation of the chapter 13 plan the court may deny the debtor a discharge due to those arrearages.  The bankruptcy filing does not preclude a modification of the DSO  during the term of the bankruptcy. 

If you have a Domestic Support Order and you are seeking bankruptcy relief find an attorney who understands the rules and pitfalls of addressing a DSO in a bankruptcy.  Do not go it alone.  Moseman Law Office can help you navigate this process and help you get your fresh start.  Excerpted from Ohio Lawyer Volume 36, No. 2.