Why will the bankruptcy court investigate whether the support that is awarded by a state court is truly support?
While bankruptcy is governed by federal law and divorce law is state law, to determine the "nature of the support," the particular state law can often be helpful. Property settlements that are enforceable by contempt (failure to comply with a lawful order of the court can be punished by contempt) are similar in construction to support orders, which are often enforceable by contempt. Thus the property settlement is closer to support than a debt.
The terms and conditions of a property settlement are different from the rules governing alimony. Generally speaking, alimony must conform to a number of rules. They are these:
1. All payments must be made in cash, check or money order. Transfer of services or property is not considered alimony.
2. Alimony agreements must be part of a written court order and separation agreement. In the absence of an agreement, one party may not unilaterally begin paying the other alimony (and then claiming it as a tax deduction).
3. Alimony must be given tax treatment. That means that the payor and payee must declare the alimony on his or her tax return.
4. The couple must not be residing in the same household. A couple may not divide living areas of the house, divorce, and then reside in the same domicile as single people, one paying alimony to the other.
5. They may not file a joint income tax return. A couple paying may not file jointly even though they may have been married for a part of the year prior to their divorce.
6. The payments must stop at the payor’s death.
7. No portion of the alimony may be considered child support. If alimony is reduced six months on either side of the date a dependent child reaches 18, 21, or the age of majority, the amount of the reduction is considered child support, not alimony.