VS. ADV. NO. 98-6006






This matter is before the Court to resolve the issue of whether a marital debt owed to the plaintiff by the defendant is dischargeable pursuant to 11 U.S.C. '523(a)(15). The plaintiff=s claim for attorney fees is also before the Court. The Court has previously entered a Partial Summary Judgment in favor of the plaintiff, holding that payments due the plaintiff from the defendant=s military pension were nondischargeable, and reserving the issues now before the Court. This Court has jurisdiction of this matter pursuant to 28 U.S.C. '1334(b); it is a core proceeding pursuant to 28 U.S.C. '157(b)(2)(I).

The first question that remains before the Court concerns the proceeds of the sale of a piece of real property pursuant to the order entered by the North Carolina court in the parties= 1988 divorce. The defendant was declared the owner of, and the plaintiff divested of any interest in, a 20.42 tract of land in Laurel County, Kentucky. The defendant was ordered to pay the plaintiff $7,000.00 upon the sale of the property. The plaintiff contends that the Court must apply '523(a)(15) to the debt to determine its dischargeability, as the amount in question was Aincurred 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.@

The burden of proof of demonstrating that this debt falls within the confines of '523(a)(15) falls upon the plaintiff, and she must demonstrate it by a preponderance of the evidence. She points to In re Gibson, 219 B.R. 195 (6th Cir.BAP 1998), wherein the panel held that all nonsupport debts incurred in connection with a divorce or separation agreement are excepted from discharge, notwithstanding the absence of Ahold harmless@ or other indemnification language, unless the debtor is unable to pay the debt or the benefit to the debtor of discharging the debt outweighs the benefit to the debtor=s former spouse of having the debt declared nondischargeable.

This Court agrees with the plaintiff that '523(a)(15) is applicable here and the Court must evaluate the debtor=s defenses provided by subsections (A) and (B) of that section. The burden now shifts to the defendant to prove either an inability to pay, or that a discharge of the debt would result in a benefit to him that outweighs the detrimental consequences to the plaintiff. This Court therefore must subject the nonsupport marital debt under consideration here to the analysis set out in '523(a)(15).

As noted by this Court in In re Owens, 191 B.R. 669 (Bkrtcy.E.D.Ky. 1995):

Since the Court has determined .... that the indebtedness .... is of the kind described in the opening paragraph of '523(a)(15), it is now necessary to determine if the affirmative defenses asserted by the debtor pursuant to subparagraph (A) or subparagraph (B) constitute an exception which renders this debt dischargeable. Since these tests are expressed in the disjunctive, if either of them is met the debt should be discharged. ....

. . . . . .

The wording of '523(a)(15)(A) is that of '1325(b), >the disposable income test=, and a similar analysis is appropriate. .... It appears that the appropriate time to measure the ability of the debtor to pay the ostensibly non-dischargeable debt is at the time of trial.

. . . . . .

Next the Court must determine if the ostensibly non-dischargeable debt .... is rendered dischargeable by the second test, '523(a)(15)(B). This test is a balancing of interests test where the Court must weigh the benefit and harm to the debtor and non-debtor by discharging or not discharging the debt. (Cites omitted.)

At 674-75.

As set out in '1325(b)(2)(A), A>disposable income= means income which is received by the debtor and which is not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor.@ In applying this test for purposes of analysis under the first prong of '523(a)(15), courts have held that the inquiry

is not controlled by [a] mere >snapshot= of the debtor=s financial strength as of a single moment in time. Rather, this inquiry must allow a court to consider the debtor=s prospective earning ability. Unlike Chapter 13 cases where, if a debtor=s finances improve or deteriorate, plan payments can be adjusted over the term of the plan, the court has no ability to revisit a debtor=s financial circumstances after the trial on the 11 U.S.C. '523(a)(15) issues. .... We therefore hold that a Court may consider facts and circumstances concerning a debtor=s future earning potential, as well as his or her income as of the date of trial of the 11 U.S.C. '523(a)(15)action in determining his ability to pay.

In re Smither, 194 B.R. 102 (Bkrtcy.W.D.Ky. 1996), at 107-08.

Determining whether the defendant has the ability to pay the obligation under consideration involves comparison of his income and his reasonable and necessary expenses. The Court will rely on his bankruptcy schedules, since he has not filed an affidavit concerning income and expenses. Schedule IBCurrent Income of Individual Debtors shows that at the end of 1997 he had $815.42 net monthly income from his job, $274.00 in disability compensation, and $1,596.00 in pension or retirement income, for a total of $2,685.42. His wife had net monthly income of $2,370.53 from her teaching position. Their total net monthly income was $5,055.96, with the plaintiff accounting for approximately 53% of the total income.

The Statement of Financial Affairs filed with the bankruptcy petition shows that the defendant=s income from his employment rose during the period from 1995-1997, as has the amount that he receives from his military pension and disability payments. His wife=s income from her employment has also risen.

Schedule JBCurrent Expenditures of Individual Debtors shows that the defendant and his wife had monthly expenses of $4,984.57. The expenses listed appear to be for the necessities of living, for payments on student loan debt and the defendant=s $700.00 per month payment to the plaintiff from his pension, and installment payments to creditors on debts they reaffirmed. The defendant and his wife reaffirmed the debts for their house and two lots, their vehicles (a 1991 Lincoln Towncar and a 1993 Ford Aerostar van), a $2,500.00 sewing machine, and a freezer. The amount of the expenses attributable to the defendant would be $2641.82, or 53% of the total.

In considering this issue, the Court notes that the defendant has not offered any proof that he cannot pay the subject debt except to state the difference between his and his wife=s total income and their total expenses. From the information in the record, it appears to the Court that the defendant is able to pay the subject debt. As a state government employee he has dependable income which is subject to regular increases. His pension and disability payments appear to be subject to regular increases as well. He maintains several life insurance policies. He has chosen to reaffirm debts which, not including mortgage payments, account for approximately $668.00 of total monthly expenses. In addition, he is apparently able to contribute toward the payment of almost $200.00 per month in telephone bills. In short, he is able to maintain the lifestyle he has chosen.

Having determined that the defendant is able to pay the subject debt, the Court now goes on to consider the issue raised by '523(a)(15)(B), i.e., whether a discharge of the debt would result in a benefit to him that outweighs the detrimental consequences to the plaintiff. Once again, the defendant does not offer any proof to support his position, and confines his argument to the plaintiff=s enjoyment of the good life on SSI and food stamps in her house trailer in Florida. Further, the defendant argues all around the fact that he owed the plaintiff the $7,000.00, that he knew he owed it, and that he chose not to pay it. It makes no difference that he spent it on living expenses for himself and his son, it was not his to spend. He still does not want to pay the debt, but while paying it may result in some inconvenience to him, it apparently will have a significant impact on the plaintiff=s life if the debt is discharged. Her poor health and marginal living conditions have not been disproved. Her inability to afford even basic repairs to her home have not been contradicted. It seems clear that this debt must be considered nondischargeable pursuant to '523(a)(15)(B).

As to the plaintiff=s claim for attorney fees, she argues that the $600.00 in fees awarded her by the Onslow County North Carolina District Court in July 1996 to compensate her for her expenses in enforcing the separation agreement in North Carolina are nondischargeable. She cites Knight v. Knight, 29 B.R. 748 (W.D.N.C. 1983) for the proposition that attorney fee awards arising from a domestic case are treated as alimony or support under North Carolina law. There the court stated:

Thus, in North Carolina, the case law indicates that the award of counsel fees in divorce and separation proceedings is determined by applying the test for alimony pendente lite; thus it is actually in the nature of alimony, even when not specifically designated as such.

At 752. Other courts have agreed that attorney fees should be treated in this manner. In Macy v. Macy, 114 F.3d 1 (1st Cir. 1997), the court affirmed the bankruptcy and district courts= rulings that Aattorneys= fees incurred by a former spouse in the course of seeking to enforce support-related payments required by a divorce decree are properly nondischargeable under 11 U.S.C. '523(a)(5)....@ At 2. See also In re Burns, 186 B.R. 637 (Bkrtcy.D.S.C. 1992). The defendant herein has not provided any response to the plaintiff=s claim for attorney fees, and this Court must agree that they should be considered nondischargeable as support pursuant to 11 U.S.C. '523(a)(5).

An order in conformity with this opinion will be entered separately.


By the Court -




Copies to:


Lois Renfro Morris, Esq.

R. Gregory Lathram, Esq.