In re Cordia, Bankruptcy No. 01-60259.

• Decision Date: 21 December 2001
• Docket Number: Bankruptcy No. 01-60259.,Adversary No. 01-6034.
• Citation: 280 B.R. 138
• Parties: In re Dale E. CORDIA, Debtor. Delpha A. Phelps, Plaintiff, v. Dale E. Cordia, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Ohio

280 B.R. 138

In re Dale E. CORDIA, Debtor Delpha A. Phelps, Plaintiff, v. Dale E. Cordia, Defendant.

Bankruptcy No. 01-60259.

Adversary No. 01-6034.

United States Bankruptcy Court, N.D. Ohio, Eastern Division.

December 21, 2001.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

William C. Greene for Plaintiff.

Donald M. Miller, Canton, OH, for Defendant-debtor.

MEMORANDUM OF DECISION

RUSS KENDIG, Bankruptcy Judge.

This adversary proceeding came before the court for trial on November 27, 2001. Plaintiff Delpha A. Phelps (hereafter "plaintiff") was represented by William C. Greene and debtor-defendant (hereafter "debtor") Dale E. Cordia was represented by Donald M. Miller. Plaintiff, ex-wife of debtor, filed this adversary proceeding seeking to have certain debts arising under the parties' judgment of divorce deemed nondischargeable pursuant to 11 U.S.C. § 523(a)(5) and (15).

The court has jurisdiction over this proceeding pursuant to 28 U.S.C. § 1334 and the general order of reference entered in this district on July 16, 1984. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(I). In accordance with Federal Rule of Bankruptcy Procedure 7052, the court's findings of facts and conclusions of law are set forth in this opinion.

FACTS

Plaintiff and debtor were married on February 14, 1992. On March 3, 1998, the Court of Common Pleas for Harrison County entered a judgment of divorce. The plaintiff was awarded the marital residence and the trucking company operated by the parties during their marriage. The decree also set forth the division of property and allocation of debts between debtor and plaintiff. At issue in this proceeding are debtor's obligations to hold plaintiff harmless on one half of the marital indebtedness and on the debts owed on a 1989 Freightliner truck and Ford pickup truck, as well as $4,600.00 owed plaintiff for a violation of a state court order.¹

Debtor filed a petition under chapter 7 of the United States Bankruptcy Code on January 26, 2001 and sought discharge of the above debts. Plaintiff was listed as both an unsecured creditor and a co-debtor in the schedules. Debtor received a discharge on May 23, 2001.

Debtor, debtor's current wife and plaintiff testified at trial. From the trial evidence and testimony, the court finds the following. Plaintiff remarried and operates D & C Trucking Company (hereafter "D & C") with her current husband, who drives for D & C. D & C is leased through Vision Express (hereafter "Vision"). D & C financial statements show a gross September 2001 income of $7,000.95 (net $4,157.45), gross October income of $6,413.55 (net $3,677.27) and a November income, through November 16, 2001, of $4,734.75 (net $2,958.25). D & C's income increased in recent months. Plaintiff testified that now she is also employed by Vision and works 30-32 hours per week at $7.00 per hour. No exhibits or other documentation of her Vision income was provided. Plaintiff testified to her belief that she expected to earn more in the future.

Plaintiff's monthly expenses are unclear. Although several exhibits were introduced, plaintiff admitted to double counting some expenses. Documents supporting the expenses were drafted by the plaintiff and are contradictory and self-serving. Further, the business and personal expenses are often commingled. The problem is exacerbated by the fact that plaintiff does not maintain a checking account, so the only means of tracking expenses is through receipts, but no receipts were introduced. Plaintiff did not produce the receipts in response to discovery. At one point, plaintiff testified she can meet her monthly expenses with a net income of $3,000 each month. She also stated that she could pay one half of the debts from the divorce judgment.

Plaintiff and her husband own their residence, which plaintiff valued at $65,000. They are purchasing an additional 15 acres by land contract.² In financial disclosure forms filed September 26, 2001 in response to the trial order,³ the real estate is valued at $82,000 and subject to a loan amount of $37,000, resulting in net equity of approximately $45,000. The other assets have a net equity of $11,500.

Plaintiff's Exhibit G lists $29,000 in total liabilities, excluding the mortgage. Exhibit G includes the joint debts allocated in the divorce decree (approximately $21,000). According to plaintiff, creditors are not undertaking collection activity on these marital debts. Plaintiff also included in Exhibit G approximately $8,000 in liabilities incurred after the divorce. No separate description of plaintiff's husband's liabilities, if any, was presented.

As for plaintiff's health and educational background, plaintiff's statement filed September 26, 2001 in response to the trial order states:

Delpha Phelps is a 46-year-old woman in fair health. She has a history of a bad back. Her education consists of completion of a high school diploma and two years of college at Stark State Technical College. Delpha does not have a college degree or special skills.

No evidence on her husband's health or education was offered. Plaintiff argued that bankruptcy is not a desirable alternative because of the equity in the real estate.

Debtor also remarried. He and his wife jointly purchased 15 acres of land approximately two or three years ago. According to Exhibit 1, the fair market value of the land is $34,700 and the debtor and his wife owe $21,995 on the real estate. Debtor testified that the value of the real estate was based on an appraisal by Barnett Realtors. His wife owns the mobile home in which they reside and the debt on it exceeds the value. The debtor and his wife have few other assets. Although debtor listed $14,000 in tools and $2,500 in Jack Daniels collectibles, these are in plaintiff's possession and she refuses to return them despite repeated demands. The Cordias other assets are valued at $2,370.

Debtor owns a 1995 International tractor, but no trailer (hereafter "truck") and has contracted for work with McIlvaine Trucking (hereafter "McIlvaine") for over a year. The truck is valued at $10,000 and $10,000 is owed. His 2001 actual income, identified in Exhibit 2 and supported by Exhibit 3, was $3,515.59 for May; $5,309.29 for June; $7,340.60 for July; and $3,731.09 for August, for an average of $4,974.14 per month. Debtor's income is net of some, but not all, expenses. He projected income of $4,000 per month for the months of November 2001 through March 2001 based on two trips per day. His trips have been drastically reduced because asphalt plants close for the winter and McIlvaine lost a large contract, so the projection far exceeds reality. When he filed, debtor hauled acid. Debtor cannot haul acid in his current truck, so he has been hauling liquid asphalt which offers only seasonal demand. Mrs. Cordia recently started working at a restaurant as a kitchen helper and a salad maker. She works 30-35 hours per week at $7.00 an hour.

Debtor listed expenses of $4,399 per month, including truck expenses of $1,707. This figure does not include payments to Union Hospital and Verizon, payment of liabilities owed by debtor's wife (which exceed $29,500) or payment on any obligations at issue here. Following his bankruptcy discharge, debtor remains liable on a $2,500 debt to the IRS. He reaffirmed his obligation on the real estate. He testified he owes his stepbrother on a loan for his truck and he incurred postpetition credit card debt and medical expenses. Debtor did not provide any information on Mrs. Cordia's ability to file for bankruptcy.

Exhibit 6, supported by testimony at trial, reveals the following.

Dale Cordia is 54 years of age. Is in fair healt (sic) condition. Dale has had 3 heart attacks, also he is a diabetic who takes insulin. Dale has had surgery on both knees and his vision is fair. Dale also wears bifocial (sic) glasses.

Dale has no special skills or training. He is a truck driver.

Rebecca Cordia is 44 years old. Is in good health condition. Rebecca has vision in only the left eye. She has daytime vision only. The only job training she had was a bookkeeping coarse (sic) in 1985. No further skills or training.

The debtor and his wife do not have health insurance coverage and cannot obtain coverage because of debtor's medical history. Debtor suffered from kidney stones and incurred $3,400 of related debt. Now the Veterans' Administration seeks to hospitalize debtor to reconstruct his knee. The VA does provide some assistance with medication.

DISCUSSION

I. 523(a)(5)

In accordance with 11 U.S.C. § 523(a)(5) and (15), marital debts can constitute an exception to the general discharge available under section 727. In order to be excepted from discharge under section 523(a)(5), the debt must be "to a spouse, former spouse or child ... of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree, or other order of a court of record ...." 11 U.S.C. § 523(a)(5). In a majority of cases filed under section 523(a)(5), the issue is whether the debt is in the nature of alimony, maintenance or support. There being no question that plaintiff is debtor's former spouse or that the obligations were incurred in connection with the judgment of divorce, this proceeding is no different.

The Sixth Circuit Court of Appeals issued several decisions explaining the analysis to be undertaken under section 523(a)(5). The case frequently cited as the baseline is Long v. Calhoun (In re Calhoun), 715 F.2d 1103 (6th Cir.1983). In Calhoun, the court had to determine whether an assumption of debt, labeled as alimony but located in the "Division of Property" section of the separation agreement, was in the nature of support.⁴ The Sixth Circuit presented a four-part analysis focusing on (1) whether the parties intended to create an obligation to be in the nature of support, (2) whether the obligation in fact provides support, (3)...