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DIVORCE AND BANKRUPTCY

 

Priority of Past-Due Child Support Over Other Creditors

This discussion of past-due child support is from “Overview of Arizona Divorce Principles for Bankruptcy Practitioners” by John McKindles

John McKindles

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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

Mesa divorce and community property attorney John McKindlesPast-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.