Priority of Past-Due Support
Over Other Creditors
Excerpt from “Overview of
Arizona Divorce Principles for Bankruptcy Practitioners”
March 2003
John McKindles
Learn more about Mr. McKindles's Divorce and
Family Law practice
Table of Contents
A.
Community Property
B. Separate Property
C. Liability for Debts of Spouse
D.
Jurisdiction to Control and
Dispose of Community and Separate Property Assets
E.
Jurisdiction to Determine
Separate Property Rights
F.
Jurisdiction Over Allocation and
Disposition of Debt
G.
ERISA Retirement Plans and the
Bankruptcy Estate
H.
Community Property and the
Bankruptcy Estate
I. Priority of Past Due Support Over
Other Creditors
J. Protection of Dissolution and
Lien Rights
K.
Advisability of Joint Bankruptcy
Filing and Conflict of Interest Problems
L.
Impact on Future Community
Property Interests
M. Impact of Discharge on Secured
Debts
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Past-due child support
debts are entitled to a priority status over other general creditors pursuant to
11 USC § 507(A)(7). Also, the ninth circuit Court of Appeals has confirmed that
the nature of the debt was more important than the designation of the payee. In
In Re Chang, C.A. 9 (1998) 160 F.3d 1138, the Ninth Circuit overruled a
Bankruptcy Appellate Panel (BAP) decision that a debtor’s obligation to pay her
share of fees for a guardian ad litem and fees for the attorney for the
minor child were not entitled to priority status as family support since they
were not payable to or for the benefit of the minor child. That BAP decision was
reversed by the ninth circuit Court of Appeals, thereby restoring the
perspective that the nature of the debt was much more important than the
consideration of its priority status than the designated payee of the debt.
Certiorari was denied by the Supreme Court, 119 S. Ct. 2029, 526 U. S. 1149,
143) L.ED.2d 1039.
However, in a case
arising in Alabama, the state of Alabama brought a claim against a debtor for
child support that it had provided to a custodial grandparent and for support
that the debtor owed to the grandparent. The state sought that priority status
for these claims and the court’s ruling entitled the grandparents’ portion of
the claim to a priority status but relegated the state’s portion of the claim to
a general unsecured claim status. See In Re Gray. Bkrtcy. N. D. Ala.
(2001) 269 B.R. 881. This holding was evidently linked to the technical reading
of subsection (A)(7) of 11 USC section 507, which reads as follows:
Section 507.
Priorities.
The following expenses and claims have priority in the following order:
... (7) allowed claims for debts 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 such debt (A) is assigned to another entity,
voluntarily, by operation of law, or otherwise, or (B) includes a liability
designated as alimony, maintenance, or support, unless such liability is
actually in the nature of alimony, maintenance, or support.
Consequently, when a
debtor files a Chapter 13 owing past-due support, the debtor must pay this claim
in full as a priority claim. In a Chapter 7 no asset case, the claim for support
is not discharged and continues to be assertable against the debtor’s
post-filing income and acquisition of assets.
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