Massey v. Chandler

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/10/06
William David Massey v. Belinda A. Chandler
04-01080
Findings of Fact and Conclusions of Law Re: [1-1] Complaint NOS 424 Objection To
Discharge (727) and Objection to dischargeability of debt (523) .
Received on: 2005-02-24 11:52:58.000
2005-02-24 00:00:00.000
2005-02-25 00:00:00.000
Ellen Snyder
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
Belinda Chandler,
Debtor. No. 7-04-11769 MS
William David Massey,
Plaintiff,
v. Adv. Proc. No. 04-1080 M
Belinda A. Chandler,
Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
THIS MATTER is before the Court on the Complaint seeking to except certain debts from
discharge pursuant to § 523(a)(15) of the Bankruptcy Code. A trial was held on January 20, 2005 at
which time the Court took the matter under advisement. Upon review of the pleadings, evidence,
arguments and applicable law, the Court concludes that the debts at issue are non-dischargeable and in
connection therewith makes the following findings of fact and conclusions of law:
1. The Defendant, Belinda A. Chandler (the “Defendant”), filed this Chapter 7 bankruptcy
case on March 12, 2004.
2. The Defendant and William David Massey (the “Plaintiff”) were divorced on December 6,
2001 by Decree of Divorce (the “Divorce Decree”) entered by the Family Division of the Second
Judicial District Court of the State of Nevada, County of Washoe (the “Nevada proceeding”). The
Plaintiff and the Defendant were awarded joint custody of their child and each waived the right to
spousal support.
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3. In the Marital Settlement and Child Support Agreement (the “MSA”), incorporated into the
Divorce Decree, the Defendant agreed to assume responsibility for a community debt to Greenpoint
Credit Corp. (the “Greenpoint debt”) and a community credit card debt to Capital One Bank (the
“Capital One debt”).
4. In the MSA the Plaintiff assumed responsibility for other community debts, agreed to pay
monthly child support to the Defendant and agreed to provide medical insurance for their child. The
Plaintiff is obligated to pay child support of $500.00 per month, which is reduced to $285.00 per
month during times he is unemployed. The Plaintiff is a plumbing contractor who is often unemployed
during the winter months.
5. In October of 2003, the Defendant defaulted on the Greenpoint debt. After repossession of
its collateral, a mobile home, Greenpoint Credit Corp. asserted a deficiency claim in the amount of
$40,185.64.
6. Greenpoint Credit Corp. attempted to collect the deficiency claim from the Plaintiff. After
the Defendant filed this bankruptcy case, Plaintiff paid $6,388.62 to Greenpoint Credit Corp. to settle
the claim against him.
7. The debt to Capital One is listed on the Defendant’s Schedule F in the amount of
$8,043.00.
8. Capital One has also contacted the Plaintiff seeking repayment of its debt.
9. In the Nevada proceeding, the Plaintiff has filed a motion for contempt against the Defendant
for breach of the MSA. The Plaintiff filed a Motion for Relief From Stay to allow this proceeding to go
forward. (Doc. 14)
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10. Defendant’s total monthly income is listed as $3,289.33 on her Amended Schedule I,
which states that $333.00 of the monthly income is from child support.
11. Defendant’s Schedule J indicates that her expenditures are $3,585.27 per month. The
Defendant has listed among her expenditures monthly charitable donations of $416.10.
12. The Plaintiff’s current net income is $3,466.00 per month, and his expenses are
approximately $3,200.00 per month. He is current on payments of child support and on the obligations
that he assumed in the divorce.
Discussion
The Plaintiff seeks to have the amount he paid to settle the Greenpoint debt and the entire
Capital One debt declared non-dischargeable pursuant to 11 U.S.C. § 523(a)(15). Section
523(a)(15) provides,
(a) A discharge under section 727 . . . of this title does not discharge an individual debtor from
any debt–
. . .
(15) not of the kind described in paragraph (5) that is 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 of record, a determination made in accordance with
State or territorial law by a governmental unit unless–
(A) the debtor does not have the ability to pay such debt from income or
property of the debtor not reasonably necessary to be expended for the
maintenance or support of the debtor or a dependent of the debtor . . .; or
(B) discharging such debt would result in a benefit to the debtor that outweighs
the detrimental consequences to a spouse, former spouse, or child of the
debtor[.]
Under this section the initial burden of proof falls on the Plaintiff who must prove that the debt is
not for alimony, maintenance and support, which are non-dischargeable under § 523(a)(5), but was
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incurred in the course of a divorce or separation. Stone v. Stone (In re Stone), 199 B.R. 753, 783
(Bankr. N.D. Ala. 1996)(describing burdens of proof under § 523(a)(15)); Hall v. Hall (In re Hall),
285 B.R. 485, 487-88 (Bankr. D. Kan. 2002)(same). If the Plaintiff meets this burden, the burden
shifts to the Defendant who, to obtain discharge of the debt, must show either inability to pay the debt
under § 523(a)(15)(A) or that the benefit of a discharge would outweigh the detrimental consequences
to the Plaintiff under § 523(a)(15)(B). Hall, 285 B.R. at 487. The courts have analyzed the
terminology in § 523(a)(15) as creating a rebuttable presumption that the divorce obligation is
nondischargeable unless the Defendant proves one of the exceptions set forth in subsection (A) or (B)
of Section 523(a)(15). Slover v. Slover (In re Slover), 191 B.R. 886, 891 (Bankr. E.D. Okla.
1991). In this case, the Plaintiff has established that the debts at issue were incurred in the course of a
divorce and are thus governed by § 523(a)(15). Therefore, to obtain a discharge of these debts, the
Defendant must show that she is entitled to discharge under one of the exceptions contained in
subsections (A) or (B) of § 523(a)(15).
The Defendant argues that she has met this burden of proof. First, the Defendant argues that
she is entitled to discharge under § 523(a)(15)(A) because she has proven her inability to pay the
debts. She argues that as shown on her bankruptcy schedules, her expenses exceed her income.
However, the appropriate time to assess ability to pay is at the time of trial, not the time the petition was
filed. See Johnson v. Johnson, (In re Johnson), 212 B.R. 662, 667 (Bankr. D. Kan. 1997)(finding
appropriate time to determine ability to pay is time of trial). The Plaintiff testified that she currently
works in the advertising department of a casino and her take-home pay is $900.00 to $920.00 per
week, which is more than her income listed on her schedules. She asserts that her expenses have not
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changed since the bankruptcy was filed. She testified that her monthly expenses are $700.00 rent,
$770.00 car payment, $200.00 insurance, $250.00 tuition for the child’s school, and $300.00-400.00
for other living expenses. Since the bankruptcy; however, the Defendant has remarried, and her
husband receives a monthly social security disbursement. The Defendant testified that her husband’s
income only covers his expenses and tuition for his children. However, the Defendant also testified that
her husband pays for the wood necessary to heat their home. The Defendant purchased a drum set for
her husband by credit card and listed that debt in her bankruptcy schedules in the amount of $3,910.00.
There is no evidence that leads the Court to conclude that the debt for the drum set will not be
discharged. The Defendant testified that she receives approximately $500.00 per month in child
support; however, the Plaintiff sometimes pays less child support to compensate for expenses during
visitation time. The Defendant concluded that she receives from $4,000.00 to $4,700.00 per year in
child support. Her car payment listed on Schedule J is for a high interest car loan; however, the car
was surrendered in the bankruptcy. There is no evidence of the amount of her current car payment, if
any. Her monthly expenses listed on Schedule J include $416.10 per month for charitable
contributions.
When examining a Defendant’s ability to pay, the Court may consider only those expenses
reasonably necessary for maintenance or support. See Dennison v. Hammond (In re Hammond),
236 B.R. 751, 767 (Bankr. D. Utah 1998)(discussing types of expenses that are not reasonably
necessary for purposes of non-dischargeability under this section). Included in the Defendant’s
expenses on her schedules are charitable contributions of over $400.00 per month. This expense
cannot be regarded as reasonably necessary for the Defendant’s maintenance or support. Id.(finding
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that charitable contributions are not reasonably necessary under § 523(a)(15)(A)). Also, the
Defendant has given the Court no information as to her current car payment, if any. Moreover, since
the bankruptcy, the Defendant has remarried, and her spouse’s income is available to cover at least one
of the household expenses. The Court concludes, therefore, that the Defendant has some discretionary
income available to pay the debts at issue. See Hammond, 236 B.R. at 767 (subtracting unnecessary
expenses to find that debtor had discretionary income to pay debts assumed in divorce). With these
facts in mind, namely the Defendant’s current income, the exclusion of the charitable contribution
expense and the lack of current information as to the amount, if any, that the Defendant pays for a
vehicle, the Court concludes that the Defendant has not proven her inability to pay as required for
discharge § 523(a)(15)(A). See Stone, 199 B.R. at 784 (finding that debtor failed to show inability to
pay because the debtor included payments on a dischargeable debts in monthly expenses).
Alternatively, the Defendant argues that the under § 523(a)(15)(B) the debts should be
discharged because the benefit of the discharge to the Defendant would outweigh the detrimental
consequences of discharge to the Plaintiff. In applying the exception in sub-section (B), the Court
compares the benefits and burdens of discharge by reviewing the financial status of the Defendant and
the Plaintiff and comparing their relative standards of living. Hart v. Molino (In re Molino), 225 B.R.
904, 908-9 (6th Cir. BAP 1998). If after discharging the debt, the Defendant’s standard of living will
be greater than or approximately equal to the Plaintiff’s standard of living, the debt should be excepted
from discharge under § 523(a)(2)(B). Id., citing In re Smither, 194 B.R. 102, 111 (Bankr. W.D. Ky.
1996). However, if the Defendant’s standard of living will fall materially below the Plaintiff’s standard
of living if the debt is not discharged, then the debt should be discharged under subsection (B). Id. See
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Smither, 194 B.R. at 111 (listing several factors to consider in balancing analysis) and Jodoin v.
Samayoa, (In re Jodoin), 209 B.R. 132,143 (9th Cir. BAP 1997)(finding that debtor failed to prove
detriment outweighed benefit). The evidence presented does not establish that the benefit to the
Defendant of discharging these debts would outweigh the detrimental consequence to the Plaintiff of a
discharge. The evidence does not show that the Plaintiff would have a superior lifestyle than the
Defendant if discharge is denied. The Defendant has not shown that the Plaintiff has more discretionary
income left after expenses than the Defendant. And, the Defendant has not shown that she will be
subject to a lower standard of living by paying these debts, especially when she is expecting to receive
a discharge of over $25,000.00 in other unsecured debts and has not reaffirmed any debts. See
Molino, 225 B.R. at 909 (excepting debt from discharge for failure of debtor to show lower standard
of living than ex-spouse would result); and Smither, 194 B.R. at 112 (noting that this section was
designed to prevent high or moderate income Defendants from undoing property settlements in
bankruptcy). Therefore, these debts are non-dischargeable under this subsection as well. The amount
that is nondischargeable is as follows: 1) the Greenpoint debt in the amount of $6,388.62; and 2) the
amount of the Capital One debt that has been or will be actually paid by the Plaintiff.
An appropriate judgment will be entered in accordance with these findings of fact and
conclusions of law. Rule 7052, Fed.R.Bankr.P.
MARK B. McFEELEY
UNITED STATES BANKRUPTCY JUDGE
I certify that on the date shown on the attached document verification, a true and correct copy of
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the foregoing was either electronically transmitted, faxed, delivered or mailed to the listed counsel
and/or parties.
William David Massey
535 Broadway, #2
Reno, NV 89502
Steven J. Clark
Attorney for Defendant
P.O. Box 1108
Peralta, NM 87042
Ellen C. Snyder
Law Clerk
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