Can I file for bankruptcy to discharge alimony, child support, or attorney fees that I was ordered to pay in a Nebraska divorce or custody case in Nebraska? A summary of “domestic support obligation” law in Nebraska.
By Aaron Bourne, Goosmann Law Sioux City
Introduction:
When Dissolution of Marriage (Divorce) cases come before the District Court in Nebraska, the Court will be called upon to decide on a multitude of different issues for both parties such as child custody, division of martial assets and debts, and potentially ordering spousal support (alimony) and for one party to pay the other party’s attorney’s fees. Complications arise when people who have gone through a divorce also have financial issues that may lead to filing for bankruptcy protection under Chapter 7 or Chapter 13 in Federal Bankruptcy Court.
Typically, when a divorce court orders that you pay child support or attorney fees, it is considered what a Bankruptcy Court deems to be a domestic support obligation. Domestic support obligations are treated very differently in bankruptcy court than standard debts if one party were to potentially declare bankruptcy. In summary, child support and alimony owed to one person is not the type of debt that can be discharged as a debt if you file for bankruptcy in Nebraska.
This raises several important questions: What exactly is a “domestic support order?” And who decides if a certain debt owed by one party in a divorce to another constitutes a domestic support order? What factors would be used to make this determination?
What is a “Domestic Support Obligation” under Nebraska Law?
Under the law how exactly is a domestic support obligation defined? 11 U.S.C. § 101 (14A0(2018 & Supp. IV2022) defines it as a debt
“(1) owed to or recoverable by….. (i) a spouse, former spouse, or child of the debtor”; (2) “in the nature of alimony, maintenance, or support”; (3) “established…. By reason of applicable provision of ….(i) a separation agreement, divorce decree, or property settlement agreement; (ii)an order of a court of record; or (iii) a determination made in accordance with applicable nonbankruptcy law”; and (4) “not assigned to a nongovernmental entity, unless that obligation is assigned voluntarily.”
Nebraska Courts have taken the view that even if the debt is “actually in the nature of” a form of maintenance or support such as alimony or child support it will be non-dischargeable in bankruptcy. [i]. This is because 11 U.S.C. §523(a)(5)(2018 & Supp. IV 2022) states that all debt categorized under a “domestic support obligation” is expressly exempted from a discharge in Chapter 13 Bankruptcy action.
Who Determines if a Particular Debt Constitutes a “Domestic Support Order?”
It is well established that domestic support orders are not able to be discharged in Chapter 13 Bankruptcy proceedings. But who actually determines if a particular debt is to be considered a domestic support order?
On this question the courts have been crystal clear. Federal circuit courts have determined that because bankruptcy is handled as a federal matter it is not state courts applying state law, but federal courts applying federal bankruptcy law that determine if a debt will be considered an alimony, spousal maintenance, or general support award per 11 U.S.C. §523 (a) . In re Taylor, 737 F.3d 670(10th Cir. 2013); In re Phegley, 443 B.R. 154 (B.A.P. 8th Cir. 2011); In re Sodergren, 802 Fed. Appx. 277 (9th Cir. 2020) ; In Matter of McCloskey, 659 Fed. Appx. 196 (5th Cir. 2016).
Specifically, Nebraska Court of Appeals has advised that Courts may afford deference to a state court’s categorization of a debt, but they are not bound by the state court’s decision.” [ii]
What Factors Does the Federal Bankruptcy Court Use in Determining Whether Debts Fall under “Domestic Support Obligation?”
The various factors that a bankruptcy court can use to determine whether an award arising out of marital dissolution proceedings was intended to serve as an award for alimony, maintenance or support to be considered “Domestic Support Obligations”, or whether it was intended to serve as a property settlement includes but are not limited to:
- the relative financial conditions of the parties at the time of the divorce;
- the respective employment histories and prospects for financial support;
- the fact that one party or another receives the marital property;
- the periodic nature of the payments; and
- whether it would be difficult for the former spouse and children to subsist without the payments.[iii]
Can Nebraska find that other obligations outside of alimony and child support to be domestic support obligations?
A recent case came before the Nebraska Court of Appeals where the Appeals Court was being asked if Attorney fees ordered by the court can be constituted a “domestic support obligation” as opposed to simply a debt that one party owes to the other.
In Quiles v. Collazo[iv],the most recent case the Nebraska Court of Appeals looked at regarding if attorney’s fees can be considered domestic support orders. In the Quiles case, a party was ordered to pay roughly $28,000 in attorney fees. A Chapter 13 Bankruptcy case was later filed. The District Court categorized the attorney fees as a domestic support obligation. When the Chapter 13 occurred, Federal Bankruptcy Court determined that the debt could not be discharged in bankruptcy.
Conclusion
A Federal Bankruptcy Court will have the final say when the Court examines the unique facts of your case to determine if a monetary award should be considered a domestic support obligation and not dischargeable in bankruptcy. If the divorce court expressly found the order to be domestic support obligation, but this is merely advisory to the Bankruptcy Court, not controlling.
Goosmann Law – Sioux City Iowa and South Sioux City Divorce Lawyer
If you have a Nebraska or Iowa divorce matter, the attorneys at Goosmann Law are available to discuss the specific facts about your situation and can provide an initial case assessment during an initial consultation. You can schedule a consultation by contacting your local Goosmann Office at (712) 226-4000 or by filling out the contact form on our website https://www.goosmannlaw.com/contact-us/.
About the Author:
Aaron C. Bourne is a Sioux City based divorce attorney that represents both Nebraska and Iowa clients in Northwest Iowa, Northeast Nebraska, Dakota County, Nebraska, and Woodbury County, Iowa.
About Goosmann Law
https://www.goosmannlaw.com/family-law-in-sioux-city
*Note: This blog post is for informational purposes only and should not be construed as legal advice or relied upon in lieu of obtaining legal advice regarding the exact particulars of your individual situation in this very complex and difficult area of Nebraska and Federal Bankruptcy law.
[i] Halouska v. Halouska, 7 Neb. App 730, 797, 585 N.W. 2d 490, 503 (1998)
[ii] In re Moeder, 220 B.R. 52 (B.A.P. 8th Cir. 1998)
[iii] In re Moeder, 220 B.R. 52 (B.A.P. 8th Cir. 1998)
[iv] Quiles v. Collazo, N.W. 3d, 33 Neb.App.180, (2024)