Child Support Repayment Can Be Wiped Out in Bankruptcy

Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.

By Diane Davis

A debtor who owes a child support overpayment to the father of her child can wipe out that debt in bankruptcy, the U.S. Bankruptcy Court for the District of New Hampshire held ( Martin v. Pelley (In re Pelley) , 2017 BL 340635, Bankr. D.N.H., 17-10007-BAH, 9/26/17 ).

Stephanie Pelley’s repayment obligation isn’t a domestic support obligation that can’t be discharged, Judge Bruce A. Harwood wrote Sept. 26 in an unreported opinion.

There was no evidence that the repayment obligation was a “debt … in the nature of alimony, maintenance, or support” for the parties’ child, the court said.

In general, domestic support obligations can’t be wiped out in bankruptcy, under Bankruptcy Code Section 523(a)(5). A “domestic support obligation” includes alimony, maintenance, and support.

David Martin and Pelley never married but had one child together. Under a child support order, Martin made monthly child support payments to Pelley.

Later, he got a modification of the child support order that reduced the monthly payments.

An audit by the New Hampshire Division of Child Support Services discovered that Martin had overpaid child support. The parties agree there is an overpayment, but don’t agree on the amount.

Pelley filed Chapter 7 bankruptcy and wanted to discharge the overpayment debt. Martin argued that it was nondischargeable.

But Pelley’s obligation wasn’t based on Martin’s need for money either to support himself or their child, the court said. Any debt owed to Martin simply arose from his overpayment of child support, it said.

Because the debt wasn’t a domestic support obligation, it is dischargeable, the court said.

Eleanor Dahar, Victor W. Dahar P.A., Manchester, N.H., represented Martin; Kevin P. Chisholm, Manchester, N.H., represented Pelley.

To contact the reporter on this story: Diane Davis in Washington at DDavis@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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