Bolton v. Bolton

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
SUSAN JENKINS BOLTON,
DEBTOR.
SUSAN JENKINS BOLTON,
PLAINTIFF,
vs.
RICHARD LEWIS BOLTON,
DEFENDANT.
CASE NUMBER: 06-03443-8-JRL
CHAPTER 7
ADVERSARY PROCEEDING
NO.: L-09-00294-8-AP
ORDER
This matter came before the court on the defendant’s motion to dismiss and plaintiff’s
motion for judgment on the pleadings. A hearing was held on September 2, 2010, in Raleigh,
North Carolina.
The plaintiff filed a Chapter 7 petition on October 27, 2006 while a case for absolute
divorce from defendant and equitable distribution was pending in state court. A discharge was
entered on May 14, 2007, but was revoked by an order entered on May 21, 2007 as being entered
SO ORDERED.
SIGNED this 13 day of September, 2010.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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erroneously. No judgment for equitable distribution has been entered in the state court and no
further proceedings have been held on the matter. The plaintiff filed an adversary proceeding on
December 21, 2009 to determine the dischargeability of any claims of the defendant, including
those based on equitable distribution, because of defendant’s failure to file a proof of claim.
In North Carolina, a decree of absolute divorce will destroy a spouse’s right to an
equitable distribution of marital property unless the right is asserted prior to a judgment of
absolute divorce. N.C. Gen. Stat § 50-11(e). The parties’ divorce decree, submitted to the court,
states that each previously made a claim for equitable distribution before the entry of the decree
and that the claim was preserved for further disposition.
It is uncontested that the parties have not settled the equitable distribution claim or
reduced it to a final judgment. The plaintiff argues defendant’s claim is not a debt “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” since it has never been adjudicated. §523(a)(15).
However, a “debt” under the Code is given the broadest possible definition and includes
obligations of the debtor “no matter how remote or contingent.” H.R. Rep. No. 95-595, 309
(1977). The defendant’s equitable distribution claim, though not adjudicated, is a contingent
debt incurred by the debtor in the course of her divorce. Furthermore, the equitable distribution
claim is a debt “in connection with a . . . divorce decree” and does not require a court order as
argued by the plaintiff.
Other provisions of §523 similarly do not require the debt at issue to be reduced to
judgment in order to be classified as nondischargeable. For example, §523(a)(9) exempts debts
for death or personal injury caused by debtor’s driving while intoxicated. The language of the
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exception formerly applied “to the extent that such debt arises from a judgment or consent
decree.” Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353
(amended in 1990). Despite the use of the term “judgment, ”the exception was interpreted as
including debts based on DWI claims that had not been reduced to judgment. In re Hudson, 859
F.2d 1418, 1420 (9th Cir. 1988). The Congressional intent of the exception was to prevent a
race to the bankruptcy court to avoid liability for drunk driving. Birdsall v. Tulloch (In re
Tulloch), 373 B.R. 370, 392 (D.N.J. 2007). Similarly, §523(a)(15) was first added to address the
use of bankruptcy by debtors to evade marital obligations. Sommer & McGarity, Collier Family
Law and the Bankruptcy Code §6.07A.
Since plaintiff’s debt to defendant falls within §523(a)(15) as a debt owed to a former
spouse in connection with a divorce decree and is nondischargable, there is no need for
defendant to file a proof of claim to later collect. Although failure to file a proof of claim
precludes a creditor from participating in the distribution of a debtor’s estate, it does not prevent
a creditor holding a nondischargable debt from collecting outside of bankruptcy. Grynberg v.
United States (In re Grynberg), 986 F.2d 367, 370 (10th Cir. 1993). See also Dolen v. Bartleson
(In re Bartleson), 253 B.R. 75 (B.A.P. 9th Cir. 2000) (holding that a confirmed plan does not
preclude creditors from collecting nondischargeable debts outside bankruptcy); Fein v. United
States, 22 F.3d 631, 632 (5th Cir. 1994) (finding that §523 does not discharge priority tax claims
that have been neither assessed nor filed); In re Spruill, 83 B.R. 359, 361, 362 (Bankr. E.D.N.C.
1988) (holding that §523(a)(1)(A) “was intended to prevent the discharge of tax claims which
were never filed or filed late but which would otherwise have been allowable.”). Thus defendant
can pursue his equitable distribution claim outside of plaintiff’s bankruptcy.
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For the foregoing reasons, defendant’s motion to dismiss is ALLOWED and plaintiff’s
motion for judgment on the pleadings in her favor is DENIED.
END OF DOCUMENT
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