Lynn Lane Wood

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
LYNN LANE WOOD,
DEBTOR.
CASE NO. 11-06583-8-JRL
CHAPTER 13
ORDER
This matter came before the court on the debtor’s former spouse’s motion to dismiss and
objection to confirmation of the debtor’s chapter 13 plan and motion for relief from the
automatic stay. A hearing was held on November 29, 2011 in Raleigh, North Carolina.
On October 20, 2008 the debtor and her former spouse entered into a marital property
agreement (“agreement”). Both parties agreed that the debtor would be primarily liable for their
mortgage debts. In regard to this and other obligations created by the agreement, “[t]he parties
[agreed] . . . that each shall indemnify and hold harmless the other for the payment of same.”
The parties also agreed to “forever give up any right to spouse support (alimony) that they may
have from the other.” Finally, section 15 of the agreement states, “[t]o the extent of any
obligation contained herein is discharged in bankruptcy and the non-bankrupt party is held liable
for said debt, the non-bankrupt party shall have the right to petition a court of competent
jurisdiction for spousal support in an amount sufficient to cover any amounts so discharged.”
SO ORDERED.
SIGNED this 04 day of January, 2012.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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Subsequently, the debtor filed a voluntary petition for relief under chapter 13 of the Bankruptcy
Code on August 26, 2011.
Discussion
The former spouse argues that the debtor’s chapter 13 plan does not provide treatment for
the domestic support obligation derived from their agreement. The debtor contends the
agreement does not create a domestic support obligation, thus it may be dischargeable under
chapter 13 of the Bankruptcy Code. In a chapter 7 case, § 523 of the Bankruptcy Code provides
greater protection to support obligations owing to a debtor’s former spouse than § 1328(a)(2) of
the Bankruptcy Code. Pursuant to § 523 of the Bankruptcy Code,
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title
does not discharge an individual debtor from any debt—
. . .
(5) for a domestic support obligation;
. . .
(15) to a spouse, former spouse, or child of the debtor and 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, or a determination made
in accordance with State or territorial law by a government unit[.]
11 U.S.C. § 523 (a)(5), (15). Subsection 15 does not apply in a chapter 13 case.
In a Chapter 13 case, an important distinction is drawn between [domestic support
obligations] and other post-marital obligations. [Domestic support obligations] may
not be discharged in Chapter 13. 11 U.S.C. § 1328(a)(2); 11 U.S.C. § 523(a)(5).
However, other types of debts arising out of a separation or divorce, including
property settlements, are dischargeable. 11 U.S.C. § 1328(a)(2); 11 U.S.C. §
523(a)(15). If an obligation underlying the claim is deemed a [domestic support
obligation], pursuant to Section 523(a)(5), then the claim is entitled to priority
treatment pursuant to Section 507(a)(1)(A), and any Chapter 13 plan must provide
for its full payment, pursuant to Section 1322(a)(2).
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In re Deberry, 429 B.R. 532, 537 (Bankr. M.D.N.C. 2010). Therefore, unless the agreement in
question is a domestic support obligation it may be discharged at the conclusion of the debtor’s
case.
The debtor’s former spouse contends the separation agreement does create a domestic
support obligation. In order for the obligation to pay marital debts to constitute a domestic
support obligation, it must be (1) owed to or recoverable by a former spouse; (2) in the nature of
alimony, maintenance, or support; (3) established before the bankruptcy relief is filed by a
separation agreement or divorce decree; and (4) not assigned other than for purpose of
collection. 11 U.S.C. § 101(14A); see also In re DeBerry, 429 B.R. at 537–38. In order to
determine whether the term is a spousal support obligation, the court should look “beyond any
labels used by the parties and instead determine whether ‘at the time of its creation the parties
intended the obligation to function as support or alimony.’” McCollum v. McCollum, 415 B.R.
625, 631 (Bankr. M.D. Ga. 2009) (quoting Cummings v. Cummings, 244 F.3d 1263, 1265 (11th
Cir. 2001)).
In Deberry the debtor did not agree to pay his former spouse alimony, spousal support, or
maintenance. However, the court stated,
[t]he language of the Separation Agreement evidences the parties’ intent that . . . [the
debtor’s] obligation to pay one-half of the debts . . . is in the nature of alimony,
maintenance, or support. This conclusion follows from the Separation Agreement,
which states that “in lieu of periodic spousal support payments” [the debtor] shall
pay [his former spouse] one-half of the minimum monthly payments for the joint
marital debts listed in paragraph 5(e).
Deberry, 429 B.R. at 539 (quoting language from the parties’ separation agreement). In the case
at hand, both parties “forever [gave] up any right to spousal support (alimony) that they may
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have from the other.” No where in the agreement does it state that the debtor’s obligations were
in lieu of spousal support, alimony, or maintenance. Based on the language of the agreement, it
is clear that the parties did not intend to have any obligations as support, alimony, or
maintenance. Additionally, the former spouse did not present any evidence that the parties
intended the debtor’s obligations to be an obligation in lieu of alimony. The court finds the
agreement amounts to a property settlement agreement which does not constitute a domestic
support obligation. This is only a contractual obligation which may be discharged after
successful completion of the debtor’s chapter 13 plan. Therefore, the plan’s failure to provide
treatment for the property settlement is not grounds for dismissal or relief from the automatic
stay.
In addition, the court finds that section 15 of the agreement, is an invalid pre-petition
waiver of discharge. See In re Cole, 226 B.R. 647, 654 (9th Cir. 1998) (The court concluded the
debtor’s pre-petition waiver of discharge was invalid because “a prepetition waiver of the
dischargeability of a debt undermines the purpose of the Code to give an honest but unfortunate
debtor a fresh start.”). The former spouse cannot use section 15 of the agreement to try and have
a court retroactively grant spousal support once in bankruptcy to avoid dischargeability. This
would stand in contravention of the purpose of the discharge in bankruptcy. If the obligation on
the debt was not intended as alimony at the time of the agreement, the court cannot change the
parties’ intent to survive the discharge in bankruptcy.
Based on the foregoing, the former spouse’s motions are DENIED.
END OF DOCUMENT
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