Can ex-husband file bankruptcy to pay back a loan to payoff his ex-wife for her Alimony?

Answer 1

An alimony obligation cannot usually be discharged in bankruptcy, but must be paid in full, with two important exceptions.

If a divorce decree specifies that an obligation to a spouse is alimony, but the obligation is not actually in the nature of alimony, then the obligation can be discharged in bankruptcy.

For example, if the divorce decree states that the husband is to pay a marital debt to XYZ Corporation, and further specifies that the husband's payment of the debt shall be treated as alimony, the husband may arguable have the ability to discharge such debt in bankruptcy even though the divorce decree calls his payment of the debt alimony.

Also, in certain instances an ex-spouse may be able to discharge an alimony obligation if the obligation has been assigned to a third party.

For example, suppose John and Mary Doe divorce. John is ordered to pay Mary alimony of $500.00 per month. John does not pay the alimony and Mary, who needs the money, assigns the right to collect alimony to her father, who gives Mary the $500.00 per month in return for the assignment. Mary's father now owns the right to collect the alimony from John. If John files bankruptcy then the alimony obligation can be discharged to the extent it has been assigned to Mary's father.

The United States Bankruptcy Code (Title 11 of the United States Code) states in Section 523 that: (a) A discharge under Section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt . . . (5) 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(A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise (other than debts assigned pursuant to § 402(a)(26) of the Social Security Act, or any such debt which has been assigned to the Federal Government or to a State or any political subdivision of such State); or

(B) such debt includes a liability designation as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance or support . . . .