Domestic Support Obligation v. Debt Settlement Obligation

In a Chapter 13 case, debt settlement obligations resulting from a divorce can be discharged; however, Domestic Support Obligations can not. The differences between the two were highlighted in a recent case.

Summary:

• The divorce agreement stipulated that the debtor would be responsible for his ex-spouse’s daughter’s student loans.

• In each of the four Chapter 13 plans, the debtor listed the loans as Domestic Support Obligations.

• Both the debtor and former spouse testified at trial that the student loan obligation was intended to be a substitute for alimony or support.

• At trial, the debtor also testified that he always had treated the former spouse’s daughter as his biological daughter and continues to do so.

The Court also reviewed the “totality of the circumstances” test to determine the relative financial status of the parties at the time of the divorce. The Court concluded that the nature of the agreement by debtor to accept responsibility for the student loan served a support-related purpose.

On their own, each of these admissions would have given the Court pause. Presented together, they made the case that the debt was clearly a Domestic Support Obligation (“DSO”) and thus, not dischargeable.

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Case is In re Eric Ciampia, (Bankr. E. D. Mass. 4/24/20) Case No. 16 – 10913.