Swanson v. Swanson

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re
Charles Swanson
Debtor
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Cheryl Swanson
Plaintiff
vs.
Charles Raymond Swanson
Defendant
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Case No. 04-12211
Adversary No. 04-01143
Chapter 7
Judge Burton Perlman
DECISION
This adversary proceeding was commenced by a somewhat
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: November 23, 2005
____________________________________________________________
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irregular complaint, which was accepted because plaintiff is
appearing pro se. Plaintiff is the divorced wife of defendant.
In her complaint she alleges that defendant has failed to pay
debts which he was obligated to pay in the divorce decree. More
specifically, the debts in question are the subject of
provisions of the Separation Agreement entered into between the
spouses and incorporated into the Decree of Dissolution entered
by the court. Plaintiff’s case therefore is one arising under
11 U.S.C. §523(a)(15).
This court has jurisdiction of this matter pursuant to 28
U.S.C. §1334(b) and the General Order of Reference entered in
this district. This is a core proceeding arising under 28
U.S.C. §157.
The proceeding came on for trial by the court. Based on the
evidence presented we find the following facts. Defendant filed
his Chapter 7 bankruptcy case on March 25, 2004. Prior to that
time, on September 23, 2003 the Common Pleas Court for Scioto
County Ohio, Domestic Relations Division, entered a Decree of
Dissolution. That decree incorporated a Separation Agreement
dated August 7, 2003 entered into between the parties. The
parties had a child in their marriage, Raymond Charles Swanson,
born December 24, 1989.
The Separation Agreement deals with division of property.
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It is quoted in pertinent pert:
ARTICLE 6: DIVISION OF PROPERTY
A. REAL ESTATE
Cheryl Swanson is the owner of real estate located
at 811 Edwards Road, Lucasville, situated in Morgan
Township, Scioto County, Ohio and consisting of 0.324
acres. This real estate is not subject to a mortgage
and bears parcel number 13-0528.006. Cheryl Swanson
shall receive and retain said real estate free and
clear of all claims of Charles Swanson. Charles
Swanson agrees to remove the mobile home located
thereon within six (6) months of the date of execution
of this agreement by the second of the parties.
Cheryl Swanson shall have the right of occupancy of
the mobile home located on this parcel of real estate
until the mobile home is sold. Charles Swanson will
be responsible for the payment of the indebtedness
owed on the mobile home until it is sold and the
proceeds of sale will be applied to the payoff of the
mobile home indebtedness. Cheryl Swanson will pay any
indebtedness associated with the real estate at 811
Edwards Road, Lucasville, Ohio, including real estate
taxes but excluding any expenses associated with the
mobile home located thereon.
The parties are the joint owners of real estate
located at 787 Edwards Road, Lucasville, Morgan
Township, Scioto County, Ohio. This real estate is
owned jointly with rights of survivorship. The
parties specifically agree that they shall retain
their rights of joint ownership with rights of
survivorship, not withstanding the termination of
their marriage. The rights of survivorship shall
extend beyond the termination of the marriage by
agreement of the parties. The parties further
acknowledge that Cheryl Swanson will vacate the
residence at 787 Edwards Road, Lucasville, Ohio prior
to the final hearing for divorce or dissolution. The
real estate, bearing parcel number 13-0528 and
consisting of 2.672 acres is subject to a mortgage
which Charles Swanson agrees to assume and pay,
holding Cheryl Swanson harmless thereon. Charles
Swanson shall also pay any and all other indebtedness
related to the real estate and he shall hold Cheryl
Swanson harmless thereon.
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Charles Swanson will attempt to refinance the
existing mortgage indebtedness and Cheryl Swanson
agrees to execute the mortgage for the same. However,
she wil not execute the promissory note for a
refinance. In the event Charles Swanson defaults
under the existing note and mortgage or a refinanced
note and mortgage, Cheryl Swanson would have the
option to pay the existing or refinanced mortgage
indebtedness and recover possession of the premises
within thirty (30) days of the date of default. The
right to enforce this provision by eviction shall
apply.
* * *
D. AUTOMOBILES AND TITLED VEHICLES
Cheryl Swanson shall receive and retain the 2002
PT Cruiser subject to a loan to Navy Federal. Cheryl
Swanson shall receive and retain this automobile and
Charles Swanson shall pay the entire indebtedness owed
to Navy Federal until paid in full within six (6)
months of the date of execution of this Agreement by
the second of
the parties. Cheryl Swanson will be solely responsible
for insurance, maintenance and repairs.
Charles Swanson shall receive and retain the 2001
Toyota Echo and the 1994 Plymouth Voyager. It is
agreed, however, that Cheryl Swanson shall be
permitted to use the Plymouth Voyager upon reasonable
request. Charles Swanson shall be solely responsible
for and shall hold Cheryl Swanson harmless as to all
expenses associated with his ownership of said
vehicle, including, but not limited to, insurance,
maintenance and repairs.
* * *
F. DISTRIBUTE SHARE
Charles Swanson agrees to pay to Cheryl Swanson,
as and for a distributive share to equalize their
assets, the sum of twenty thousand dollars
($20,000.00) payable within six (6) months of the date
of execution of this Agreement by the second of the
parties. The parties acknowledge that Charles Swanson
may prepay all or part of said twenty thousand dollars
($20,000.00)upon receiving proper receipt from Cheryl
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Swanson and he shall be credited for any such
payments. In the event payment in full is not
completed within six (6) months of the date of the
execution of this Agreement by the second of the
parties, any balance due shall thereafter bear
interest at the rate of 10% per annum.
The Separation Agreement also deals with personal
indebtedness of the parties, thus:
ARTICLE 7: MARITAL INDEBTEDNESS
With respect to the financial obligations incurred
by the parties during the marriage, Charles Swanson
agrees to pay the following indebtedness;
1) Mobile home indebtedness owed to Navy Federal
with a monthly payment of $363.00 and an approximate
balance of $24,000.00. Charles Swanson agrees to sell
the mobile home and to apply the proceeds of sale to
the payment of indebtedness.
2) PT Cruiser indebtedness owed to Navy Federal.
This automobile is in the possession of Cheryl Swanson
and it will be paid monthly by Charles Swanson with
the balance to be paid in full within six (6) months
of the date of signing this Agreement by the second of
the parties.
3) The indebtedness owed to Navy Federal on the
2001 Toyota Echo with a monthly payment of $370.00 and
an approximate balance of $12,000.00.
4) Residential mortgage owed to Navy Federal with
a payment of $399.00 per month and an approximate
balance of $37,800.00.
The following indebtedness will be paid in full by
Charles Swanson within six (6) months of the date of
this execution of this Agreement by the second of the
parties:
5) NFCU Credit Union loan with an approximate
balance of $9339.00.
6) CITI with an approximate balance of $1,972.00.
7) Lowe’s with an approximate balance of
$1,181.00.
8) Sears in the name of Cheryl Swanson and an
approximate balance of $538.00.
9) Sears in the name of Charles Swanson and an
approximate balance of $210.00.
10) Providian in the name of Cheryl Swanson and an
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approximate balance of $1,236.00.
11) Providian in the name of Charles Swanson and an
approximate balance of $954.00.
12) Capital One in the name of Cheryl Swanson and
an approximate balance of $951.00.
13) Capital One in the name of Charles Swanson and
an approximate balance of $482.00.
14) Beneficial with an approximate balance of $8,100.00.
15) K-Mart with an approximate balance of $282.00.
16) Birdhouse with an approximate balance of $514.00.
17) All outstanding and previously incurred
uninsured medical bills for both parties.
In addition in Article 8 the Separation Agreement expressly
provides that neither party shall pay spousal support to the
other. Plaintiff suffered a permanent traumatic brain injury
on July
4, 2002.
At the trial it was established that the $20,000.00
required to be paid by defendant to plaintiff by Article 6(F) of
the Settlement Agreement had been paid to her. In addition the
evidence established that the defendant’s obligation to pay off
the 2002 PT Cruiser had been met.
Plaintiff does not dispute the foregoing, but asserts that
she is entitled to an additional $20,000.00 as equity in the
property located at 787 Edwards Road. There is, however, no
requirement in the Separation Agreement to this effect, and
plaintiff’s contention in this respect therefore fails.
There remains to be dealt with the list of obligations
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imposed upon defendant in Article 7 of the Separation Agreement.
Resolution of this question turns on the application of 11
U.S.C. §523(a)(15) which provides:
(a) A discharge under section 727,1141,1228(1),
1228(b), or 1328(b) 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 and, if the debtor is engaged in a
business, for the payment of expenditures necessary
for the continuation, preservation, and operation of
such business; 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;
The foregoing statute thus provides that there are two
exceptions to nondischargeability of property settlement
provisions. These are that (1)debtor proves his inability to
pay the debt provided in the Settlement Agreement, or (2) a
discharge of the debt would benefit the debtor more than it
would harm the former spouse. Debtor bears the burden of
proving by a preponderance of the evidence that to be
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dischargable a debt arising in a property settlement agreement
must meet one of these two exceptions. Grogan v. Garner 498
U.S. 279, 291, 111 S.Ct. 654, 112 L.Ed.2d 755(1991); Davis v.
Cox 356 F. 3rd 76, 95 (1st Cir. 2004); Gamble v. Gamble (In re
Gamble) 143 F. 3rd 223, 226 (5th Cir. 1998). Neither in his
answer nor in his pretrial statement has defendant stated which
of these two exceptions he relies upon to support his position
that his indebtedness arising from the Settlement Agreement are
dischargeable. We therefore consider the evidence before us in
connection with both grounds of exception.
We deal first with the question of whether defendant has the
ability to pay the debts in Article 7 of the Separation
Agreement. It is clear that defendant does not presently have
the income to pay the indebtedness itemized in the Separation
Agreement. He was, however, earning in access of $50,000.00 a
year thru 2003. He retired, thereafter drawing a nominal
income, because it became necessary for him to take custody of
the son. Because of plaintiff’s injury, symptoms of which
continue to be apparent, she was unable to provide for the son.
Defendant then quit his job to look after the son. The son is
now 16 years old. Defendant has presented no evidence to show
that his son continues to require so much of his time that he
could not return to full time employment and to the income
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which he was able to earn before. It was the observation of the
court of defendant upon his appearance in court that he appears
to be in good health, of middle years, and thus well able to
return to full employment. We therefore conclude that defendant
has failed to prove by a preponderance of the evidence that he
is unable to pay the support agreement debts in question. In
reaching this conclusion, it is entirely appropriate for us to
consider defendant’s employment history and prospects. Hart v.
Molino (In re Molino) 225 B.R. 904 (6th Cir. BAP, 1998) (“We
conclude that a court may look to a debtor’s prior employment,
future employment opportunities, and health status to determine
the future earn potential of the Debtor.”) See also Hastings v.
Konick (In re Konick) 236 B.R. 524 (1st Cir. BAP 1999); Levin v.
Farmer (In re Farmer) 250 B.R. 427 (Bankr. M.D. FLA. 2000).
We hold that defendant has failed to prove an inability to
pay the debts in question.
We turn then to the second exception provided in the
statute, whether discharging the debt would result in the
benefit to the debtor that outweighs the detrimental
consequences to the spouse. We have concluded in the preceding
paragraphs that defendant has failed to prove an inability to
pay the debts, and the corollary
to that conclusion is that he does have the ability to pay them.
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Defendant, on the other hand, suffers from permanent brain
damage, and it is clear that because of that she cannot pay the
debts provided for in the support agreement. From these facts,
the court reaches the conclusion that defendant has failed to
satisfy the balancing test of §523(a)(15), that is, that debtor
has failed to prove by a preponderance of the evidence that a
discharge would confer on him a benefit that outweighs the
detrimental consequences to plaintiff. See Hart v. Molino (In
re Molino), supra.
Defendant’s obligation to make those payments specified in
Article 7 of the Separation Agreement which have not been paid
is therefore not discharged.
Copies to:
Cheryl Swanson
P.O. Box 881
Dublin, OH 43017
Charles Swanson
787 Edwards Road
Lucasville, OH 45648
John R. Stevenson, Esq
116 Poole Street
West Portsmouth, OH 45663
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Office of the U.S. Trustee
36 E. Seventh Street
Cincinnati, OH 45202
# # #
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