As Riverside personal bankruptcy lawyers, we frequently have to tell our clients that child support and spousal support (alimony) debts are not dischargeable in bankruptcy. This doesn't mean that debtors may not restructure the debts in order to catch up on missed payments, but they must pay the full amount of the debt. The logical extreme of this was tested in Burnett v. Burnett, an Eighth U.S. Circuit Court of Appeals case centering around interest on unpaid spousal and child support owed by a Chapter 13 bankruptcy debtor. Clarence Burnett's appeal asked the court to deny his former wife, Nancy Jo Burnett, the right to pursue him for payment of unpaid child and spousal support and interest. This demand was made shortly after Clarence Burnett and his current spouse finished their Chapter 13 bankruptcy, which discharged other debts and paid some but not all of his support arrears.
The Burnetts had a child in 1971 and divorced in 1983. In their divorce, Clarence Burnett agreed to pay $750 a month in child support and alimony, without specifying how much of each type of support. However, he didn't pay, and by 2001, when the child was 30, a West Virginia court determined that he owed more than $57,000. Before that court could calculate the interest he owed, he and his current spouse filed for bankruptcy. There followed "protracted bankruptcy litigation" on the support payments, which finally resulted in a bankruptcy plan in which Clarence Burnett agreed to pay $300 a month for the term of the bankruptcy and as long after as it took to pay off his debt. The plan also gave Nancy Jo Burnett the right to go back to court for interest on the child support arrears.
Clarence Burnett finished his bankruptcy plan in 2007. One month after his discharge, the West Virginia Bureau of Child Support Enforcement went to court to ask for a determination of the interest owed on the child support arrears. The court eventually awarded Nancy Jo Burnett child support arrears for the full $750 a month, plus interest, plus spousal support of $375 a month continuing from the child's eighteenth birthday to the present, plus interest. It ordered withholding of a bit more than $700 a month from Clarence Burnett's military pension. He then asked the bankruptcy court to reopen the case and reduce the withholding to the $300 monthly payment in his bankruptcy plan. The bankruptcy court reduced the withholding, but on appeal, the Bankruptcy Appeals Panel reversed, finding that the bankruptcy plan specifically left open the issue of interest and any post-petition debts to Nancy Jo Burnett. Clarence Burnett appealed.
On appeal, Clarence Burnett argued that his confirmed bankruptcy plan gave his ex-wife the right only to child support interest. The Eighth Circuit decided in his favor for a different reason. Under the bankruptcy code, it said, a confirmed bankruptcy plan is binding even if a creditor has no relief under it. This gives the plan res judicata effect -- courts must respect it as a binding decision. This means that Nancy Jo Burnett may not return to court to litigate her spousal support claim, even though spousal support is non-dischargeable in bankruptcy -- even a plan that violates the law is fixed. However, she is entitled to litigate interest on both types of support because they are post-petition debts And because she is entitled to collect that debt, the West Virginia court may withhold more than $300 from Clarence Burnett's income. Thus, it reversed the order on spousal support, upheld the other awards and asked the West Virginia court to determine withholding again.
Our Santa Ana individual bankruptcy attorneys are pleased to get some clarity on the complicated issue of family support debts. As a rule, clients with family support debts who end up filing for bankruptcy do so for other reasons, since any reputable bankruptcy attorney will tell them they cannot discharge their family support obligations. This ruling helps us give more precise advice to clients in situations like Clarence Burnett's, especially if it is extended to the Ninth Circuit. It should be noted that the child who is the focus of these child support efforts is now 40, which shows that the courts do not care whether the child actually needs the financial support at issue -- a debt is a debt. That's why it's so important to face your debt obligations head-on, with help from an experienced Torrance consumer bankruptcy lawyer if necessary.
Howard Law PC represents people throughout California who are considering bankruptcy as a way to deal with overwhelming debt. For more information on how bankruptcy might affect your situation, we urge you to call us for a free consultation. You can send us a message online or call 1-800-872-5925.