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Attorney fees treated as domestic support obligation

| Sep 27, 2016 | Bankruptcy |

Kentucky debtors who are considering filing for Chapter 13 bankruptcy protection might be interested in learning about a case that more clearly defines what a domestic support obligation includes. Domestic support obligations are not able to be discharged in bankruptcy. In Chapter 13 plans, they are considered to be priority debts that must be paid in full during the repayment plan period.

A man who filed for Chapter 13 bankruptcy protection had been ordered by a family court to pay his ex-wife’s attorney fees in the amount of $25,000. The money was ordered because the man had over-litigated the child custody and support case, dragging it out for months in an effort to exert control. The man never paid the attorney, and she filed a claim with the bankruptcy court stating that her fees should be treated as a domestic support obligation. A district court agreed with the bankruptcy court and ordered the man to pay it.

On appeal to the U.S. Court of Appeals for the 7th Circuit, the man argued that the money was not in the nature of support because it was ordered as a punishment rather than as support and that the payee was not his ex-wife. The court didn’t address his argument about the payee because he had failed to raise it in the lower court. It found that the fees were support and that they would need to be treated as priority claims.

There are several different types of unsecured debts that are treated as priority debts in Chapter 13 bankruptcy cases. A bankruptcy lawyer may advise whether a client has any debts that must be repaid in full through the repayment plan. The debtor may pay portions of the unsecured, non-priority debts with the remaining balances discharged upon successful completion of the repayment plan.