Will Bankruptcy Affect My Security Clearance?
Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
Let’s face it. Military families are not immune to financial problems. Here in the Charleston, South Carolina area, there’s a strong military presence with the Charleston Air Force Base and the Naval Weapons Station. And let’s not forget that Charleston is a Coast Guard Sector as well.
In addition to wondering about how to deal with their financial problems, service members ask, “How will this affect my security clearance?” I’ve also counseled many civil service workers with the same question.
Filing Bankruptcy Won’t, by Itself, Affect Your Security Clearance
Filing bankruptcy or experiencing foreclosure isn’t, by itself, enough to warrant a change in your security clearance, but the circumstances surrounding the decision might. For example, if this is your third bankruptcy and you’ve been experiencing consistent debt problems as a result of poor money management for the last two decades, the government may view this as an indicator of irresponsibility and poor judgment. However, if you’ve found yourself in debt because of an unexpected unemployment issue or other financial calamity and acted responsibly under the circumstances, then the government will be far less likely to alter your security clearance status.
Each security clearance decision is governed by U.S. Department of Defense Revised Adjudicative Guidelines. When considering whether security clearance should be granted, suspended, revoked or generally affected in any way, the guidelines instruct the authorities to examine:
(1) The nature, extent, and seriousness of the individual’s conduct; (2) the circumstances surrounding the conduct; (3) the frequency and recency of the conduct; (4) the individual’s age and maturity at the time of the conduct; (5) the voluntariness of participation; (6) the presence or absence of rehabilitation and other behavioral changes; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence. Directive, Revised Adjudicative Guidelines (AG) ¶ 2(a)(1)-(9)
The Air Force Academy website specifically addresses the issue of bankruptcy and the service member’s security clearance:
The status of your security clearance can be affected, but it is not automatic. The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors, such as your job performance and relationship with your chain of command. The security section will weigh whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident, or by financial irresponsibility. The security section may also consider the recommendations and comments of your chain of command and co-workers. This is an issue that can be argued both ways, so as a practical matter your security clearance probably should not be a significant factor in making your decision about whether to file bankruptcy. The amount of your unpaid debts, by itself, may jeopardize your clearance, even if you don’t file bankruptcy. In that sense, not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility. Eliminating your debts through bankruptcy may make you less of a security risk. There is no hard and fast answer here, with one exception: it never hurts to have a good reputation with your co-workers and your chain of command. (emphasis added).
Likewise, the Army has made it clear that bankruptcy will not automatically cause security clearance issues, stating: “[B]ankruptcy will not automatically prevent obtaining a security clearance. There are many other conditions surrounding financial hardships that often mitigate security concerns . . . [and] 98 percent of cases received by the [Army Central Personnel Security Clearance Facility] which involve financial issues were granted a security clearance. This trend has been consistent since 2005.”
The real question is the amount of your unpaid debt, your financial history, the reasonableness of your actions, and the security risk that may arise due to the threat of bribery, coercion, or something similar. In fact, these websites indicate that filing bankruptcy may indicate good judgment and the ability to take financial responsibility on the service member’s part.
Now Let’s Talk Reality
Here’s the reality. If you have financial problems, you must deal with them. I tell my clients that having financial problems is like having a tumor. And there are two ways you get rid of the tumor: (1) you pay the money back (in full or by debt settlement), or (2) you file bankruptcy. But the tumor doesn’t just magically go away. It must be treated. Not filing bankruptcy to save your security clearance doesn’t make sense. At your next review, the investigator will run your credit. He’ll see the bad debt, the late payments, the foreclosure—you name it. Wouldn’t it be better that he find out you dealt with your mistakes using federal law (the Bankruptcy Code) and that since your bankruptcy, there have been no financial problems?
I’ve represented bankruptcy clients for almost fifteen years and never heard of a client’s security clearance being negatively affected by bankruptcy. More importantly, I have talked with other bankruptcy lawyers about this. One of these attorneys, San Diego bankruptcy lawyer Michael Doan, has represented over 25,000 clients in his career and never heard of any negative impact on his client’s security clearance. (San Diego is home to Camp Pendleton, a very large Marine Corps base.)
If you need financial help, get it. Sometimes that’s filing bankruptcy, and sometimes not. What’s important is to deal with your financial problems in a responsible manner. Ignoring your financial problems will certainly not help you obtain or maintain your security clearance. Our bankruptcy law is designed to help the “honest but unfortunate debtor” obtain a fresh start. And this applies to those in the military as well.
Bankruptcy for Senior Citizens: Older Clients Have Unique Needs
Guest Post Written by Atlanta Bankruptcy Lawyer, Jonathan Ginsberg
Bankruptcy lawyers throughout the country report a significant increase in the number of seniors seeking federal bankruptcy protection. In my Atlanta area bankruptcy practice, I speak to retirees frequently about debt issues and I have filed cases–usually under Chapter 7–for many of these folks.
Not surprisingly, many of the senior citizens I meet have waited months or even years to seek counsel about bankruptcy protection. Many of these men and women grew up in time where bankruptcies were rarely filed and financial problems were handled within the family, rather than in a public forum.
I suspect that some of my older clients are surprised when I agree with their assessment that bankruptcy is and should always be a last resort. In addition to providing legal services, a thoughtful bankruptcy attorney has an obligation to counsel our clients about both bankruptcy and non-bankruptcy options.
In fact, I am frequently able to advise these clients that bankruptcy is not necessary at all. Seniors with few assets and whose income comes solely from Social Security are effectively judgment-proof because the Social Security law provides specifically that–with limited exceptions for taxes, student loans or child support–government retirement or disability benefits cannot be seized by a judgment creditor. State laws often provide additional protection for personal property and even real estate. (Check with a lawyer who practices in the state where you live.)
Often, my advice boils down to advising my clients to avoid commingling their Social Security money with a spouse or adult child’s money, and offering suggestions about how to firmly, but politely, write a “drop dead” letter to a harassing bill collector.
I have met with far too many seniors who have allowed themselves to be pressured into giving a bill collector access to an otherwise protected checking account. My point here is simple: If you are a senior and you are over your head in debt, do not assume that any of the information offered to you by a bill collector is accurate. Knowledgeable and experienced consumer bankruptcy lawyers–folks like Russ DeMott, the publisher of this blog–will be happy to answer a question or two to calm your fears and empower you with the peace of mind needed to make an informed decision about bankruptcy options in your specific situation.
Special thanks to my friend and colleague, Jonathan Ginsberg, for this excellent post. Jonathan is the author of one of the nation’s leading bankruptcy blogs, which can be found at www.thebklawyer.com/thebkblog. He is an invaluable resource to me, and I appreciate his willingness to do this guest post. I, too, have noted the same reluctance with the older clients I’ve dealt with over the years. We both agree. If you need help, ask for it. Knowing your rights can bring emotional relief.
–Russ DeMott
Bankruptcy Don’ts: Defining Stupid
Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
It started with a text message from my friend, Frank. “Skeet shooting? 4-wheelers?,” it said. I figured he meant one or the other, both of which I enjoy. So I called Frank and he gave me directions to a local sportsman’s club. Both skeet shooting and four wheeling?” I asked. “Yes, both,” Frank replied. And that was all it took.
So I got in my truck and headed out to the club. I had a great time, especially running my four-wheeler through long trenches filled with water—it had just rained. The club has hunting, four-wheeling, camping, and a small cabin with a bathroom, shower, stove, and a refrigerator. Oh, and one of the members stocks snack chips in local grocery stores, so when the chips are expired by one day, guess where they end up?
All this led me to ask, “What are the rules?” And to that question came a surprisingly simple response: “Don’t do anything stupid.”
This, in turn, reminded me of my friend’s admonition to his teenage children before they went out for the night: “Don’t do anything stupid,” which was followed by a quick, “do I have to define stupid?” I like this so much, I use it with my own kids. Of course, they roll their eyes and answer, “no, dad, you don’t have to define stupid.” But I think it’s working—I hope.
It’s just hard to define stupid. And people should know stupid when they see it, shouldn’t they?
It’s kind of like comedian Bill Engvall’s “Here’s Your Sign!” jokes. Take the one about the deer crossing sign:
Engvall’s wife says, “Why do they put those deer crossing signs up? Deer can’t read.”
Engvall’s reply: “No, but they can recognize pictures of themselves. Here’s your sign.”
So while I can’t define stupid, I know of some things bankruptcy clients can do to cause big problems in their cases. Take a look at the “Bankruptcy Don’ts” on the resources page of my website for a list of things you shouldn’t do. And this list is by no means exhaustive, so if you have doubts, ask your bankruptcy attorney! By using good judgment about things, you’ll help ensure the success of your bankruptcy case. Poor decisions can be costly. We care and want your case to be as successful as possible.
Tim Clue: Face Your Debts Head On! (Sort of)
Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
Let’s face it. Debt isn’t funny, nor is bankruptcy. But sometimes you need a break from the stress and worry. Check out comedian Tim Clue as he talks about how he faced debt head on. Maybe debt can be funny after all?
Stop Foreclosure with Chapter 13 Bankruptcy
Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
I’ve often referred to Chapter 13 as a tool. And here’s one thing this tool is good for: Stopping Foreclosure.
I got a call last night from a client whose home is scheduled to be sold at a foreclosure sale in a few days. He and his wife have very little unsecured debt (like credit cards). But they have one huge problem. A few months back the wife lost her job, and during the time she was unemployed, they fell behind on their mortgage payments. In fact, they fell way behind on payments.
The good news is the wife found another job and they now make enough money to make their house payments. However, the lender–as is the case all too often–won’t work with them to restructure their mortgage. It’s insisting on a large lump sum in order to reinstate the mortgage loan. Like many things lenders do, this makes no sense. If the lender forecloses, it will end up owning the property. And foreclosure properties sell for significantly less than other properties. While waiting for it to sell, the lender must pay for repairs, maintenance costs, utilities, and taxes. The home would then sell months from now for a huge loss and, on top of all this, the lender would have to pay a realtor’s commission at closing.
Despite this reality, lenders press on with foreclosure, apparently glad to hasten their losses. Go figure.
Bankruptcy Stops the Foreclosure Sale
But here’s where Chapter 13 comes to the rescue. When your bankruptcy is filed, an automatic stay enters, which stops the foreclosure. However, that you must file bankruptcy before the property is sold. In South Carolina under the “hammer rule” rule, once the gavel hits, the property is sold, and your ability to cure the mortgage arrearage is gone. So stopping the sale is the first step.
Your Chapter 13 Plan Allows You to Catch Up on Payments
In addition to being able to stop the sale, Chapter 13 allows you to catch up on missed mortgage payments. We call this “curing the arrearage.” For example, if you are $10,000 behind, you could propose to cure that arrearage by paying $200 per month into a five-year plan to do this. (And obviously, if you are only $5,000 behind, you could propose $100 per month to cure the arrearage.) You’d also likely have other debts to deal with such as car payments. These, too, would be paid in your plan. But the big picture is that Chapter 13 allows you to do what your mortgage lender won’t. You simply pay a bit extra each month and get caught up on payments over time.
But What If I Can’t Afford My Mortgage Payments?
And there’s the rub. For Chapter 13 to work, you have to be able to resume making your regular, ongoing mortgage payments and, at the same time, pay an additional amount into your Chapter 13 plan to cure the arrearage. If you can’t make your regular payment, your plan is not “feasible,” and it won’t be approved by the court.
You also need to understand that Chapter 13 can’t lower your mortgage payment or your interest rate. (There is an exception to this with a second or third mortgage that’s wholly unsecured, and I’ll address in a future post.)
For many people, however, Chapter 13 is a great foreclosure avoidance tool, especially when the reason for the mortgage arrearage was a temporary loss in income like the couple who contacted me about their upcoming foreclosure sale.
Important: Don’t wait until the last minute to contact a bankruptcy lawyer if you are facing foreclosure. Act quickly even if you are still trying to work things out with your lender. If you wait until a day or two before the sale, you may not be able to find a bankruptcy lawyer who can help you in time.
What is Chapter 7 Bankruptcy? (O’Keefe, Part One)
Written by Charleston Bankruptcy Attorney, Russell A. DeMott
This is another good video post done by my colleague at Bankruptcy Law Network, Kurt O’Keefe. Kurt is a bankruptcy lawyer in Detroit, but the process he describes is the same here in South Carolina. Kurt discusses the Chapter 7 process from filing the case to the time the case is closed. He also stresses some important points to keep in mind.
You’ll see that he stresses that all creditors must be listed in your bankruptcy and he gives some examples. I explain this to my clients by telling them to list every creditor they have in the Milky Way galaxy. And that’s everyone you owe money to, including even people who say you owe them money when you don’t. We just mark those claims as “disputed.” Listing creditors is even more important in Chapter 13 cases, but I’ll address that in another post.
Kurt also gives a good overview of the bankruptcy hearing, called the 341 hearing or First Meeting of creditors. I hope you find the post helpful.
Bankruptcy Lawyer’s Fees: “How Much is It?”
Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
It happened again today. I got a call about “it.” Specifically, the lady wanted to know how much “it” was. What was the “it” she called about? Well, she said she had a “simple” bankruptcy case and wanted to know how much “it” was. That’s it–pardon the pun–just how much “it” was going to cost for her “simple” case.
I have a confession to make. When I get calls like this, it makes me want to go bang my head against the wall. And I’ve decided to tell you why calls about “its” cost bother me so much.
Each Case Is Unique
Each case is unique. I said this so much when writing content for my bankruptcy site, one of my friends said, “you’ve said ‘each case is unique’ several time in here. Maybe you should replace it with something else.’” Well, I didn’t. Why? Each case is unique. And repetition aids learning. Did I mention that each case is unique?
Do you really want me to treat your case just like everyone else’s? You’re up to your eyeballs in debt, right? Can’t sleep? Maybe fighting with your husband? Stressed out? Fixing this financial mess is something you want done right, isn’t it? Why should I assume your case is a “routine” case when I know nothing about it?
How Much Is a Car?
Huh? Well, think about that a minute. How much is a car? Hopefully, you get the point. Is it a big car? Little car? New one? Used? Or perhaps a truck like I drive? V-8? Fuel efficient? Oh, and how many doors? I forgot to ask. What will you use the car for? See what I mean?
How can I tell you how much I’ll charge you for your bankruptcy on the phone? Will it be a Chapter 7? Or a Chapter 13? Is there a business involved? Exemption problems? Over median income? Under? Do we have to run the means test? Will you pass? Will I have to spend more time making sure you have all available expenses counted on the means test? Or should I just throw you in a Chapter 13 because I don’t want to spend time on your file since you were so concerned about the cost of “it”? You get the picture–I hope.
But She Said She Had a “Simple” Case!
And maybe she’s right. But is she qualified to know if her case is simple? It’s like me saying, “hey, doc, it’s really simple surgery” with a quick “how much is it?” thrown in.
Seriously though. How would a client be qualified to analyze their own bankruptcy case and conclude that he has a routine, simple case? How would the client know? Yes, sometimes the client might be right about the case being simple. And sometimes I make good stock picks, too. Everyone gets lucky from time to time–even me with my stock picks.
Keep the Big Picture in Mind
I know money’s tight. I’m sympathetic to your situation. But you have a boatload of debt, right? Why should someone with $97,000 of unsecured debt really concern themselves with what their bankruptcy lawyer charges? Let’s say the total cost of the attorney fee, filing fees, and other costs is $3,000–maybe you have some issues in your case requiring extra attention. Now let’s think about this a minute. You owe the credit industrial complex–as one of my friends calls it–$97,000, and you’re concerned about the $3,000 fee, why? You want the debt GONE. You want an attorney who’ll spend the time with your file so that absolutely everything will be done to get you out from under this mountain of debt. Why would you choose an attorney on price?
There’s a Lot of Work in Any Bankruptcy Case!
Even with a simple bankruptcy case–one that really is, relatively, simple–there’s a lot of work for your bankruptcy lawyer to do. And then there’s his secretary and paralegal; they do lots and lots of work, too. Hours and hours and hours of work. Picking bankruptcy lawyers based on fees is a bad idea.
I’ll Tell You What It Costs When I Evaluate Your Case
I do quote a fixed fee for my clients. But I only do this after I evaluate their cases carefully. So please don’t call me and ask how much “it” is! Oh, and did I mention that each case is unique?
How Long Will Bankruptcy Screw Up My Credit?
Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
Okay. I admit it. The title’s a bit blunt even for me. But this was one of the Google searches that brought a potential client to my site. I feel a bit guilty for not answering this question yet, so this one’s for the guy (or gal) who has a question about screwed up credit. And it’s a fair question.
I get it all the time. “How long will it be before my credit rating recovers?” “This will destroy my credit, won’t it?” If I had a dime every time I’d been asked those questions over the years, I’d be a rich man.
Your Credit Rating is Already Screwed Up!
My answer to this question is usually the same: “you already have bad credit.” The vast majority of clients who see me are delinquent on their debts. This, of course, is why they came to me in the first place. They have 30 day lates, 60s, 90s, lawsuits, judgments, and everything in between.
Having debts problems is like a tumor, though. You get rid of it two different ways: (1) you pay off the debt–and that’s not an option much of the time, or (2) you file bankruptcy and discharge it. If you do nothing, the tumor just grows and grows. Cutting it out allows you to heal. It allows a fresh start. And remember, for some of you your good credit rating got you into the mess you’re in. It allowed you to obtain too many loans, too many credit cards, insanely high credit limits, and to get just plain overextended. It was the financial industry’s idiotic blind faith in the almighty credit score at work. In case you didn’t know, your credit score doesn’t take into account your income or your assets. Those used to be pretty important for bankers. But those times are long gone. Actually analyzing a client’s entire financial picture would take too much work and require someone to actually think. So we have “the score.” No thinking. It’s like magic. And that’s likely why some of you fret about the score too much.
Okay, okay. But How Long Will it Be Before I Have a Good Credit Rating?
Fair question. After all, you want to be able to refinance your house, buy a new house, or finance a car. For mortgage loans, the bankruptcy will “screw up” your chances at getting a mortgage for two to three years, depending on whether you do a conventional mortgage or an FHA mortgage. Interestingly, foreclosure is far worse than bankruptcy for your mortgage chances. Foreclosure screws you up for four years. So the damage caused by bankruptcy is not forever. And bankruptcy is better than doing nothing and allowing a foreclosure to happen.
This holds true for auto loans as well. In fact, you’ll be able to get an auto loan right after your bankruptcy is completed; you’ll just pay a high interest rate. No worries. The world is awash in used cars, and you’ll get a loan for one. If you must take this route, just don’t get an expensive car. Keep it at about $10,000 or less.
This Isn’t the Issue Anyway!
The real issue is whether or not you can get through your financial problems without filing bankruptcy. If not, bankruptcy is your only option. If, on the other hand, you can avoid bankruptcy, you should. But in either case your credit will recover. You won’t be in financial purgatory forever.
If you need to file bankruptcy, worrying about your credit rating is senseless. If it’s not already bad, it probably will be very soon, whether or not you file bankruptcy. The concern should be solving your financial problems. And bankruptcy helps lots of people do that every day.
Domestic Support Obligations in Bankruptcy (Part Three)
Written by Charleston Bankruptcy Attorney, Russell A. DeMott
In parts one and two of “Domestic Support Obligations in Bankruptcy,” I explained what a domestic support obligation was and that it’s something you can’t discharge in bankruptcy, regardless of whether you file a Chapter 7 or Chapter 13 bankruptcy.
In this post, I’ll address the how domestic support obligations will affect your bankruptcy case.
Domestic Support Obligations Must Be Listed
If you have a domestic support obligation (“DSO”), you must list that debt in your bankruptcy schedules. You must do this even if you are current on that obligation. You should list the DSO recipient as well as any agency involved in the collection of support. In South Carolina, for example, the Department of Social Services has a child support division that collects and disburses child support. Any arrearages should also be listed.
Exempt Property Can Be Sold to Pay DSO Arrearages
Exemptions are property you may protect from creditors and the bankruptcy trustee. For example, in South Carolina you can have up to $51,450 in equity in your home–doubled for married debtors where both are on title. That means the trustee cannot sell your home if you have less than that amout of equity, and if you have more equity than that, the trustee could sell your home, but he’d have to pay you the amount of your exemption in the property. However, for DSO arrearages the rules change. The Bankruptcy Code gives the trustee the right to sell non-exempt property to satisfy DSO arrearages. This underscores the need to avoid having arrearages, or at least keep them to a minimum.
DSO arrearages happen from time to time for legitimate reasons like job loss or disability, for example. The DSO obligation is typically modified in those instances–eventually. But filing bankruptcy with large arrearages can cause problems, especially in Chapter 7 bankruptcy because there is no repayment plan in which you can cure those arrearages. The only source for curing arrearages in Chapter 7 may be your house, car, or other property.
Domestic Support Arrearages Must be Cured in Chapter 13
As noted above, you must list DSO obligations in your bankruptcy. To obtain plan confirmation in a Chapter 13 bankruptcy, you must propose to cure any DOS arrearages in the plan. (Chapter 13 cases typically run from three to five years.) DSO arrearages are one of several “priority” debts, and those debts must be paid in full in your Chapter 13. You must also remain current on your ongoing DSO obligation. In fact, prior to the court issuing your Chapter 13 discharge, you must certify that you are current on your DSO.
The Trustee Will Contact the DSO Recipient
The Bankruptcy Code requires the trustee to contact the DSO recipient about your bankruptcy. So even if no arrearages are listed in your bankruptcy, the trustee will verify this by contacting the DSO recipient. So make sure any arrearages are listed.
Domestic Support Obligations in Bankruptcy (Part Two)
Written by Charleston Bankruptcy Attorney, Russell A. DeMott
In “Domestic Support Obligations in Bankruptcy (Part One),” I discussed the Bankruptcy Code’s definition of a domestic support obligation (we’ll call it a “DSO”). In this post, I’ll address two important bankruptcy considerations regarding DSOs. First, they are non-dischargeable in any chapter of the Bankruptcy Code. Second, DSO enforcement efforts are not subject to the automatic stay.
Child Support and Alimony Cannot be Discharged in Bankruptcy
Section 523(a)(5) specifically excepts DSOs from discharge in bankruptcy. The non-dischargeability of DSOs is absolute. Unlike student loans, for example, you cannot demonstrate “undue hardship” or make any other showing that would allow you to discharge your DSO.
You Must Address Child Support or Alimony Issues in Family Court
What this means is that to have any hope of altering your child support or alimony, you must do that in Family Court. If your ongoing payments are too high, you must ask the family court judge to lower those payments. If the recipient of the support will agree to a modification, you can enter a consent order lowering the ongoing payments. For example, if you lost your job and your only source of income is unemployment, your former spouse may be sane enough to understand that there is no way you can make child support payments as required by your current order. Support could be modified by consent, then modified again once your income increases. If insanity persists–as is the case in many family law matters–you should immediately file a motion to have your support lowered. Do not delay filing the motion. Most courts will not retroactively modify support. In other words, the date of the modification will not pre-date the filing of your motion to modify support.
Likewise with arrearages, any hope you have is with the Family Court. For child support, there are two types of arrearages: first, the obvious type–those owed to the other parent. Second, those owed to the state.
As for arrearages owed to the other parent, she can consent to having the arrearages modified. For example, if you got behind on child support, your former wife could agree to forgive those arrearages. Believe it or not, sometimes this happens. If you have some legitimate reason for being behind and have a decent relationship for your former spouse, it certainly can’t hurt to ask. However, the decision is entirely up to the recipient. That means if your former spouse won’t agree to forgive the arrearages, they remain. Absent some extreme circumstances–like fraud–the family court cannot modify arrearages.
The second type of arrearages are those owed to the state because the child support recipient was receiving welfare benefits under the Temporary Assistance for Needy Families (“TANF”). (Until 2001, this program was formerly known as Aid to Families with Dependent Children.) Those arrearages are assigned to the state because the state is, in effect, supporting the children while the recipient receives welfare benefits. With state arrearages you must negotiate with a Department of Social Services representative. (Note that the name of the agency which collects child support varies from state to state.) He will have authority to accept a settlement for arrearages owing to the state. State arrearages are much easier to settle than those owing a DSO recipient.
In either case just remember this: You’ll accomplish nothing with child support or alimony arrearages in Bankruptcy Court. You must deal with these issues in Family Court.
DSO Enforcement is not Subject to the Automatic Stay
The automatic stay is like a force field of sorts that goes into effect–you guessed it–automatically, but will not to stop state court enforcement of DSO orders. This means that not only will bankruptcy not discharge your child support or alimony obligation, but also that you won’t even get a temporary break from enforcement action. The only action that would be stayed would be state court attempts to take property of the bankruptcy estate to satisfy the DSO. This doesn’t mean much, though. It just means seizure of the debtor’s property to satisfy a DSO is reserved for the bankruptcy trustee.
In “Domestic Support Obligations in Bankruptcy (Part Three)” I’ll explain the interplay between property exemptions and DSO arrearages. I’ll also explain the bankruptcy trustee’s obligations to DSO recipients.
