Mayes v. Mayes; 10-50261; July 26, 2011
This case came before the Bankruptcy Court on the Debtor’s ex-wife’s motion to deny discharge of a debt under 11 U.S.C. § 523(a)(15). The debt at issue was a loan that the Debtor had discharged in his Chapter 7 Bankruptcy which the Debtor and ex-wife borrowed from a bank as co-debtors, while married.
The ex-wife argues that the contribution owed by the Debtor on the loan is a debt to her as the Debtor’s former spouse, rather than a debt owed to the bank. The Debtor argues that the ex-wife is not entitled to deny discharge of the debt under § 523(a)(15), because the debt is owed to the bank and not the ex-wife as a spouse, the debt was not incurred in the course of the divorce or separation, and, the debt was not in connection with a separation agreement, divorce decree, or any other order of a court.
Bankruptcy Code § 523(a)(15) requires that the party seeking nondischargeability of a debt prove by a preponderance of the evidence the following elements: (1) that the debt in question is owed to a spouse, former spouse, or child of the debtor; (2) that the debt in question is not of the kind described in § 523(a)(5); and (3) that the debt in question was incurred by the debtor (a) in the course of a divorce, (b) in the course of a separation, or (c) in connection with a (I) separation agreement, (ii) divorce decree or other order of a court of record, or (iii) a determination made in accordance with State or territorial law by a governmental unit. In order to prevail, the ex-wife has the burden of proving all three elements of § 523(a)(15).
The Court held that the ex-wife failed to prove the elements required for nondischargeability under § 523(a)(15) and, therefore, the debt could not be held nondischargeable. The Court ruled that element (1) was not satisfied in that the loan was not owed to a former spouse: the loan was between the co-debtors (ex-wife and Debtor collectively) and the bank, rather than between the Debtor and ex-wife. Because the Debt was not owed to the ex-wife, the ex-wife failed to satisfy the first requirement of § 523(a)(15), and therefore the Court ruled that the ex-wife was not entitled to have the loan declared as nondischargeable.
The Court also noted that even if the debt had satisfied the first requirement for nondischargeability under § 523(a)(15), it nevertheless would still not have been entitled to nondischargeability based on the third requirement for nondischargeability under § 523(a)(15) because it was a voluntary debt entered into by the parties years before the separation or divorce occurred, and therefore was not a debt incurred by the debtor in the course of a divorce or separation.
