Bankruptcy and Divorce

On July 30th, United States Bankruptcy Judge Carol Doyle issued an opinion with the specific goal of providing “guidance to parties and to state courts” about the intersection of divorce and bankruptcy. Steven Welsch was in a chapter 13; his plan is confirmed, and the case is proceeding without incident. Steven’s ex-wife, Trenda, filed a request to modify the automatic stay so that she could ask the state court to modify a domestic support order from their divorce case.

When a debtor files for bankruptcy, the debtor and his property are immediately protected by the “automatic stay,” which stops many efforts at collecting debt owed the debtor. The automatic stay, in essence, freezes everything into place.

At issue in the Welsches’ case was, however, one of the major exceptions to the automatic stay. The automatic stay does not stay a civil action or proceeding (i) for the establishment of paternity, (ii) for the establishment or modification of a domestic support obligation, (iii) concerning child custody or visitation, (iv) for dissolution of marriage (with one exception – the division of property that’s already in the bankruptcy estate), or (v) regarding domestic violence. These proceedings can continue as if no bankruptcy was in effect.

Ms. Welsch was seeking a modification of the debtor’s obligation to pay child support. That would be a modification of domestic support obligation, and so is specifically excepted from the stay. State courts, Judge Doyle held, may enter orders establishing a party’s right to alimony, maintenance, or support, and may modify such an order without violating the stay. As such, Ms. Welsch’s request was denied – but it was denied as unnecessary, because she was seeking permission from the bankruptcy court to do something that didn’t need permission.