For despritfreya 523(a)(15)

[latigo]

Dear Des:

As one notably qualified in this field of law and most eloquent would you kindly indulge me the favor of responding to the following?

My question has to do with the phrase ” (debt to a former spouse) incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree . . . “ as found in 15 USC 523 (a) (15).

If the divorce decree, separation agreement, etc. speaks only of assigning a specific marital debt to, say the husband - and there is no language whereby the husband is obligated to hold and save the wife harmless from further liability on such indebtedness – does the mere assigning of such a pre-existing joint obligation constituted a debt incurred to the wife within the meaning of the statute and thus not dischargeable?

Or does the assignment of the obligation imply a covenant to indemnify the spouse? Has sub (15) been interpreted to apply to all property settlement agreements or orders that include a division of marital debts?

Assume that the ex husband obtains a discharge on a marital debt that was assigned to him in a divorce proceeding (that is, not considered as a debt incurred to the wife) -- if the ex wife brought civil contempt charges in the family court because of the debtor’s nonpayment would it be a violation of the discharge injunction?

 

[despritfreya]

Latigo,

You make some very interesting points. I have never considered such as I cannot remember ever dealing with a decree that did not have the indemnification language in it. Is this an issue of some urgency? I would like to do a bit of research. Not sure if I will find anything. Unfortunately I have family in town and probably will not get to this for a few days.

Des.

 

[despritfreya]

In, In re Mayes, 455 B.R. 506 (Bankr. W.D. Va., 2011) husband and wife took out a loan secured by a parent’s home. They were “co-borrowers”. The divorce decreed did not specify which spouse would pay the loan. Wife tried to claim that the debt was not dischargeable as to the husband. Court held,

The Court finds that the Loan is between the Plaintiff and the Debtor as codebtors, and Page Valley Bank, as the lender. It is not between the Plaintiff and the Debtor. The Plaintiff does not have a judgment against the Debtor requiring him to pay contribution to her on account of the Loan nor does the Plaintiff present any documentation that would indicate that the Debtor has agreed to pay the Plaintiff on account of the Loan. Accordingly, the Court finds the Loan is not owed to the Plaintiff and thus, fails to satisfy the first requirement of § 523(a)(15). . .

Even if the debt owed on the Loan was owed to the Plaintiff the Court finds that said debt is not entitled to nondischargeability under § 523(a)(15) because the debt was not incurred in the course of a divorce or separation. Indeed, the Loan was executed nearly five years prior to their separation. Additionally, the debt owed on the Loan is not in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit. The Debtor has entered into evidence the Divorce Decree from the Page County Circuit Court. Nowhere in the Divorce Decree does it specify that the Debtor is to pay the Plaintiff money on account of the Loan.

But see. . .


In re Prensky, 416 B.R. 406 (Bankr.N.J., 2009)

The few courts that have addressed the issue in this case are divided. Some courts require an indemnity, or "hold harmless" clause creating direct liability from the debtor to the former spouse. Other courts hold that an obligation to pay debts arising out of a separation or divorce agreement run from the debtor to the ex-spouse without an express indemnity or "hold harmless" clause.

And. . .

In re Burckhalter, 389 B.R. 185 (Bankr.Colo., 2008)

While the Defendant admits that he agreed to pay the Capital One debt, he denies that he agreed to indemnify the Plaintiff from such debt. According to the terms of the Settlement Agreement, Plaintiff was obligated to pay a Mastercard credit card debt and the Defendant was obligated to pay the Capital One debt. With respect to the Capital One debt, the Defendant raises the argument that, because he did not agree to indemnify or hold Plaintiff harmless in the Separation Agreement, the debt should be dischargeable. The Court disagrees. . .

According to Defendant, there is no debt owed to Plaintiff because of the lack of any hold harmless or indemnification language in the agreement. Instead, the debt is owed directly to Capital One. . . That is a position that has substantial case law support. A number of bankruptcy courts have found marital debts such as the one under consideration in this case to be dischargeable because of a lack of hold harmless or indemnification language in the parties' divorce decree or property settlement. . .

(In this case,) the parties did not check (the) box to indicate their intention that the Separation Agreement should, or should not, include a hold harmless provision. Thus, the parties' intention is ambiguous. . . However, the Court's focus is not on the intention of the parties, as it would be in a typical contract enforcement action, because, under Colorado law, the terms of the Separation Agreement "are no longer enforceable as contract terms”. . . The core question is whether an obligation, embodied in a domestic court order, to pay a pre-existing marital debt owed to a third party, in the absence of a hold harmless provision, is a debt owed "to a spouse, former spouse, or child of the debtor ... that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record ...." within the meaning of § 523(a)(15). . .

Under COLO.REV.STAT. § 14-10-112(5), the Separation Agreement "may be enforced by all remedies available for the enforcement of a judgment, including contempt." Certainly then, the Divorce Decree and all terms of the Separation Agreement incorporated into the Divorce Decree are enforceable in proceedings for contempt of court. . .

Thus, the Domestic Court has available to it the full range of remedies. . . to compel obedience to its orders. It is clearly within the power of the Colorado courts to enforce Defendant's agreement to pay the Capital One Debt, with or without a hold harmless provision in the Separation Agreement or the Divorce Decree. Both the traditional contempt powers available to all courts and the contempt powers written into Colorado's procedural rules are broad enough to allow entry of a judgment indemnifying the Plaintiff for any damages, she should suffer as a consequence of Defendant's failure to comply with the Divorce Decree. . .

In sum, whether or not the Separation Agreement contains an indemnity or hold harmless provision is immaterial. Plaintiff and Defendant were the parties to the dissolution proceedings. Regardless of whether the obligation is to pay money directly to Plaintiff or to Capital One, she is the intended beneficiary of that obligation and the obligation is fully enforceable by the Domestic Court. The Divorce Decree does create a "debt" to the Plaintiff as that term is used in 11 U.S.C. § 523(a)(15). It is a debt that is, as yet, unliquidated because the Domestic Court has yet to take action to enforce its Divorce Decree. When it does, it may or may not do so by entering a money judgment in the Plaintiffs favor. But it is not necessary for this Court to find that a money judgment in Plaintiffs favor will inevitably enter. It is enough that it is well within the power of the Domestic Court to enter such a judgment.

So, as you can see, the answer to this issue will depend upon the court and state law. Nothing is ever black & white.

Des.

 

[latigo]

In, In re Mayes, 455 B.R. 506 (Bankr. W.D. Va., 2011) husband and wife took out a loan secured by a parent’s home. They were “co-borrowers”. The divorce decreed did not specify which spouse would pay the loan. Wife tried to claim that the debt was not dischargeable as to the husband. Court held . . . . . .

Thanks for making it all crystal clear!

In re Burckhalter should be mandatory reading as a condition to obtaining a marriage license in Colorado.

Capital One could not see to the incarceration of the defendant but the ex wife could. Black Robe justice; ignore precedent, decide how you want the story to end, then write an accommodating script.

But I’m wondering if Burckhalter didn’t conveniently omit an interesting caveat to COLO.REV.STAT. § 14-10-112(5), as hi-lited below:

"(5) Terms of the agreement set forth in the decree may be enforced by all remedies available for the enforcement of a judgment, including contempt, but are no longer enforceable as contract terms."

Although subsection (5) makes available all remedies for the enforcement of a judgment, it does not say that such a judgment may be entered. Which seems consistent with the caveat.

So, if the property settlement agreement is not enforceable in contract, on what basis could the ex-wife apply for a judgment? The availability on which Burckhalter seems to hinge?

“It is enough that it is well within the power of the Domestic Court to enter such a judgment.”

(Just rhetorical normal senseless musing here.)

___________________

Anyway, Lord Chesterfield (1694-1773) was not favored with a gread deal of prescience when he wrote, “The only solid and lasting peace between a man and his wife is a separation.”

Much thanks for your time and courtesies!

Sax a/k/a Lat

 

[latigo]

In, In re Mayes, 455 B.R. 506 (Bankr. W.D. Va., 2011) husband and wife took out a loan secured by a parent’s home. They were “co-borrowers”. The divorce decreed did not specify which spouse would pay the loan. Wife tried to claim that the debt was not dischargeable as to the husband. Court held, . . . .

Thanks for making everything crystal clear, duh?

In re Burckhalter should be mandatory reading as a condition to obtaining a marriage license in Colorado.

Capital One could not see to the incarceration of the defendant but his ex wife could. Black Robe justice; decide how you want the story to end. Then write an accommodating script.

But I’m wondering if Burckhalter didn’t conveniently omit an interesting caveat to COLO.REV.STAT. § 14-10-112(5), as hi-lited below:

(5) Terms of the agreement set forth in the decree may be enforced by all remedies available for the enforcement of a judgment, including contempt, but are no longer enforceable as contract terms.

Although subsection (5) makes available all remedies for the enforcement of a judgment, it does not say that such a judgment may be entered. Which seems consistent with the caveat.

So, if the property settlement agreement is not enforceable in contract, on what basis could the ex-wife apply for a judgment? A judgment upon which Burckhalter decision seems to hinge?

“It is enough that it is well within the power of the Domestic Court to enter such a judgment.”

Just rhetorical musing here.
_________________

Anyway, Lord Chesterfield (1694-1773) was not favored with a great deal of prescience when he wrote, “The only solid and lasting peace between a man and his wife is a separation.”

Much thanks and appreciation for your time.

Sax a/k/a Lat