In re Bell
| Decision Date | 21 May 1986 |
| Docket Number | Bankruptcy No. 83-05288-H1-5,Adv. No. 84-0415-H3. |
| Citation | 61 BR 171 |
| Parties | In re William Warren BELL, Jr. aka Bill Bell, Debtor. Janice D. BELL, Plaintiff, v. William Warren BELL, Jr., Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
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David Speed Elder, Sewell & Riggs, J. Eugene Clements, Porter & Clements, Houston, Tex., for plaintiff.
Gary C. Miller, Mayer, Day & Caldwell, Houston, Tex., for defendant.
William Warren Bell, Jr. filed suit for divorce in the 245th Judicial District Court of Harris County, Texas in 1979, against his wife of 26 years, Janice D. Bell. They entered into a written agreement incident to divorce ("agreement") dated June 28, 1980, and the court with jurisdiction entered a final decree of divorce on August 4, 1980.
Two years later, plaintiff commenced contempt proceedings in the state court to encourage defendant to comply with the provisions of that contract.
On December 8, 1983, one day before the trial was to commence in state court, the defendant sought relief as a debtor under Chapter 11 of the Bankruptcy Code ("Code").
Thereafter on April 24, 1984, plaintiff filed a complaint in federal court, alleging defendant's general noncompliance with the agreement. She alleged, inter alia, that defendant owed her certain nondischargeable debts.
Plaintiff's complaint came on for trial on December 4, 1985.
Plaintiff claims defendant owes her $64,000 for nonpayment of alimony from 1981 through 1985. Plaintiff contends alimony is a debt made nondischargeable under § 523(a)(5) of the Code.
Defendant, however, says that the monthly payments to his wife are dischargeable debts, because those payments are not in the nature of support, i.e. alimony, but are a division of community property.
Whether a particular debt is a support obligation or division of property is a question of bankruptcy law, not state law. The legislative history surrounding the enactment of § 523 of the Code makes it clear that what constitutes alimony, maintenance, or support is to be determined under bankruptcy law.1
To resolve the controversy whether the past due alimony payments owed by the defendant under the agreement constitute a nondischargeable debt, it is necessary to examine § 523(a)(5) of the Code and the history behind it.
Family support obligations have long been excepted from discharge. The obligation of a husband to support his wife and family by providing them with the necessities of life has long been recognized as an inescapable duty.2
Prior to statutory enactment, the nondischargeability of family support obligations was based on the theory that the obligation to support a spouse or child was not a debt but a duty, and only a debt could be discharged.3 Because alimony and child support stem from a husband's absolute duty to support his family and to protect communities from families being left destitute by irresponsible husbands and fathers,4 such was not considered a debt.
In 1903, Congress amended the Act by providing that a discharge would not release a bankrupt from his liability "for alimony due or to become due or for maintenance or support of wife or child."5
Title 11 of the Code as in Section 17 of the Act, continues the theme that certain family obligations should not be discharged. 11 U.S.C. § 523.
Section 523(a)(5) of the Code provides that:
Section 523 of the Code is substantially similar to Section 17 of the Act and leaves unchanged the principle that obligations created by property settlements are divisions of property and are dischargeable in bankruptcy. 11 U.S.C. § 523(a)(5). The Code, however, did clarify the Act by including language regarding former spouses. 11 U.S.C. § 523(a)(5). The purpose of the change in the Code was to clarify that the obligation to pay alimony after a final judgment or decree of divorce continues to be a debt nondischargeable, even though the recipient is a former spouse.
To be a debt nondischargeable under section 523(a)(5), the Code requires that (i) the obligation must actually be for or in the nature of alimony or support; (ii) it must be payable to the spouse, child; and (iii) it must be in connection with a separation agreement, divorce decree, property settlement agreement or other order of a court of record. Liability for maintenance or support will be deemed nondischargeable if the aforementioned criteria are met. 11 U.S.C. § 523.
In determining whether an obligation constitutes alimony, maintenance, or support to a spouse or former spouse within the meaning of § 523(a)(5), or whether the obligation is in fact a division of property, bankruptcy courts look beyond the characterization placed on an award by the state court. In re Nunnally, 506 F.2d 1024 (5th Cir.1975); Hixson v. Hixson, 23 B.R. 492, 495 (Bkrtcy.S.D.Ohio 1982). In re Jensen, 17 B.R. 537, 539 (Bkrtcy.W.D. Mo.1982) The test is whether the debt was incurred or its payment directed in discharge of a matrimonial obligation for alimony, maintenance or support.
The majority of bankruptcy courts use several factors to determine whether the debt was incurred or its payment directed in discharge of a matrimonial obligation constitutes alimony, maintenance or support, or is a division of property. In ascertaining the underlying purpose of the state court decree or actual intentions of the parties, bankruptcy courts consider some or all of the following factors: the description and context of the disputed provisions in the divorce agreement; whether a lump sum or terminable periodic payments were provided for; the length of the marriage; whether children need to be provided for; the relative earning power of the spouses; the adequacy of support absent the payments in question; the parties' negotiations and understanding of the provisions, and the function which the award was intended to accomplish. Hixson, supra, at 495. In re Fox, 5 B.R. 317, 320 (Bkrtcy.N.D.Texas, 1980); In re Holland, 48 B.R. 874, 876 (Bkrtcy.N.D.Texas 1984); In re Petoske, 16 B.R. 412, 414 (Bkrtcy.E.D.N.Y.1982); In re Eisenberg, 18 B.R. 1001, 1003 (Bkrtcy.E.D. N.Y.1982). Some bankruptcy courts have expanded their list to include other factors.
Plaintiff refers to Section V of the agreement entered into between the parties, which is entitled "Alimony" and recites in pertinent part:
"The parties acknowledge that dividing marital property does not discharge all obligations arising from the marital relationship and that of similar importance are the difference in earning power between husband and wife, fault in breaking up the marriage. . . . "
The evidence revealed in the case at bar that during their marriage of 26 years, the defendant was employed as an oil and gas attorney, while the plaintiff did not work outside the home. At the time of their divorce in August, 1980, there was a vast difference in earning power between the plaintiff and defendant. It is obvious that it would take plaintiff time to enter the work force and become self-supporting.
Consistent with the intent to support the wife until she was self-supporting is the provision of the agreement allowing for monthly installment of support payments to the wife. If the parties had intended for the money to be a division of community property, the parties would have agreed that the wife was due one lump sum.
It is striking to note that although the defendant now claims that the monthly payments were not intended as alimony, he admits listing those payments as alimony when he deducted them each year on his income tax return.
The intent of the parties in the case before us was to provide support for the wife. Only after careful negotiations did the parties agree that the defendant should pay to plaintiff 121 monthly installments of alimony for plaintiff's support and maintenance.
In reviewing whether the 121 monthly installments constituted alimony in the case at bar, a disposition on each of the factors previously set forth show that the monthly alimony payments set forth in the agreement constitute matrimonial obligation for alimony, maintenance or support for the wife, not a division of community property, making these payments nondischargeable under § 523(a)(5) of the Code.
Defendant shall pay plaintiff the sum of $64,000, plus interest from the date each monthly amount was due, until it is paid in full.6
Defendant argues, however, that, even if the court determines that the monthly payments constitute an obligation to support, he should be entitled to a discharge of that obligation so as to allow him a "fresh start" as is intended under the Code.7 Defendant contends that his ability to pay has substantially changed since the obligation originally arose, making enforcement of the monthly support payments inequitable. Defendant requests this court to consider his current general inability to pay.
Currently there exists a conflict within the circuits as to the effect of changed circumstances on the dischargeability issue regarding support obligations...
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...in bankruptcy; an obligation to make maintenance or support payments to a spouse cannot. 11 U.S.C. § 523(a)(5)2; In re Bell, 61 B.R. 171, 174 (Bankr.S.D.Tex.1986). Hence the frequency with which bankruptcy courts must determine whether an obligation under a divorce decree or like document i......