HOUSTON _ In its first major overhaul of federal bankruptcy
law in 16 years, Congress recently made it tougher to use
bankruptcy as a weapon against a former spouse.
Bankruptcy reform also changed who is eligible for various
kinds of bankruptcy and also how much property a filer can
Debts incurred in the course of a divorce or separation or in
connection with a separation agreement or divorce decree can no
longer be wiped out.
These includes debts incurred while married that one party
agreed to pay as part of a divorce settlement and any money owed
the former spouse in property settlements.
Under the old law, certain kinds of non-child or spousal
support obligations _ such as settlements for community property
_ incurred in a divorce or separation could be discharged by
"They (members of Congress) were trying to close loopholes
that some people use to try to modify their support obligations,"
said Mark Taylor, a bankruptcy attorney at the Dallas office of
Liddell, Sapp, Zivley, Hill LaBoon.
The new law adds child support and alimony to the list of
so-called "priority debts" that must be paid first in
Under the old law, child support and alimony were treated as
general unsecured debt and stood at the end of the payment line
with all other unsecured claims, such as credit card debt.
The new law also allows a state court to continue with a
lawsuit to establish paternity, establish or modify child support
or alimony or collect child support or alimony.
"You cannot avoid these debts by bankruptcy," said Richard
Dole, a law professor at the University of Houston. "If these
debts are the problem, don't file for bankruptcy.
Under the new law, if you used your credit card to pay income
taxes, which otherwise couldn't be dismissed, that debt couldn't
be wiped out by filing for bankruptcy.
The bankruptcy reforms also carry changes that will benefit
For example, Congress made it easier for people to make good
on late mortgage payments and save their homes from foreclosure.
"The debtor can pay that past due amount right up to the time
of foreclosure," Taylor said. "You could walk up to the
foreclosure sale and pay your bill."
Under the old law, that wasn't possible once a court entered a
foreclosure judgment, Taylor said.
The new law also will make it easier for some big borrowers to
file for protection under Chapter 13 of the U.S. Bankruptcy
Consumers who wanted to file for bankruptcy under Chapter 13
but couldn't because of previous debt ceilings can now enter that
door because Congress raised the limits by passing the Bankruptcy
Reform Act of 1994. …