United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

____________

No. 97-6098NE

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In re: *

*

Michael Moeder *

*

Debtor. *

*

Martha Moeder *

* Appeal from the United

States

Plaintiff-Appellee, * Bankruptcy Court

for the 

* District of Nebraska

-v.- *

*

Michael Moeder *

*

Defendant-Appellant. *

*

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Submitted: March 13, 1998

 Filed: April 28, 1998

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Before KOGER, Chief Judge, SCOTT, and DREHER, Bankruptcy

Judges.

____________

DREHER, Bankruptcy Judge.

This appeal allows us to revisit the issue of the

dischargeability of marital obligations under § 523 of the

Bankruptcy Code. The bankruptcy court in this case held that

certain debts owed to the debtor's former spouse are

nondischargeable under 11 U.S.C. § 523(a)(5) and (a)(15).
2

After carefully considering the arguments of the parties and

the record on appeal, we affirm in part and reverse in part.
3

I. BACKGROUND

Michael ("Michael") and Martha ("Martha") Moeder were

married on November 20, 1982. During their marriage, the

parties adopted Nicole Michelle Moeder, a minor child born on

September 13, 1990. Eventually Michael and Martha separated,

and, on March 22, 1996, they were divorced by decree entered

in Nebraska state court. Under the terms of the divorce

decree, Martha was awarded sole custody of Nicole and Michael

was ordered to pay child support in the sum of $265 per month

until Nicole reached the age of majority, died or became

emancipated. In addition, the state court ordered Michael to:

(1) pay alimony in the amount of $100 per month for a term of

forty-eight months; (2) provide health insurance for Nicole;

(3) pay 78% of all unreimbursed medical expenses incurred on

Nicole's behalf; (4) pay a $985 outstanding debt to Nicole's

child psychologist; and (5) pay to Martha the sum of $10,392

plus interest, representing Martha's share of the marital

property awarded to Michael under the decree.

On September 24, 1996, Michael filed a petition for relief

under Chapter 7 of the United States Bankruptcy Code. On

October 24, 1996, Martha commenced the present adversary

proceeding, seeking a determination that certain of Michael's

obligations under the divorce decree are nondischargeable

pursuant to 11 U.S.C. § 523(a)(5) and (a)(15). After

conducting a trial on the issue, the bankruptcy court ruled

that Michael's obligation to pay alimony, his obligation to pay

Nicole's medical expenses, and his obligation to pay the child

psychologist constituted nondischargeable "alimony, maintenance

or support" under § 523(a)(5). The bankruptcy court further

ruled that Michael's $10,392 property settlement obligation

constituted a nondischargeable property settlement pursuant to

§ 523(a)(15). In making its decision under § 523(a)(15), the

bankruptcy court found that Michael did not have the ability

to pay his debt to Martha from his disposable income, but
In addition to his appellate brief, Michael has submitted for consideration by the Court a 1

Reply Brief and an Affidavit of John D. Rouse, to which Martha has objected. In light of

Michael's pro se status, we believe that a certain degree of flexibility is warranted, and we

therefore deny Martha's motion to strike Michael's Reply Brief. As for Michael's submission of

the Rouse Affidavit, however, it is quite clear that the time for submitting evidence in this case has

passed and we deny Michael's request to submit additional evidence on appeal. Finally, as for

Michael's objection to the admissibility of exhibit #16 (a letter from Dr. Konar), Michael failed to

make this objection at trial and any objection he may have had has been waived.

4

nevertheless concluded that the debt was nondischargeable

because the benefit to Michael of discharging the debt was

outweighed by the detrimental effect that nonpayment of the

debt would have on Martha. Michael appeals.1
5

II. DISCUSSION

Section 523(a) of the Bankruptcy Code excepts certain

categories of debts from a debtor's discharge granted under

section 727, 1141, 1228(a), 1228(b) or 1328(b). Among the

debts rendered nondischargeable by this provision are marital

obligations owed to a spouse, former spouse, or child of the

debtor incurred by the debtor in the course of a divorce or

separation. Specifically, § 523(a)(5) of the Code excepts from

discharge any debt:

to a spouse, former spouse, or child of the debtor,

for alimony to, maintenance for, or support of such

spouse or child, in connection with a separation

agreement, divorce decree or other order of a court

of record, determination made in accordance with

State or territorial law by a governmental unit, or

property settlement agreement, but not to the extent

that --

(A) such debt is assigned to another entity,

voluntarily, by operation of law, or otherwise

(other than debts assigned pursuant to section

408(a)(3) of the Social Security Act, or any

such debt which has been assigned to the Federal

Government or to a State or any political

subdivision of such State); or

(B) such debt includes a liability

designated as alimony, maintenance, or support,

unless such liability is actually in the nature

of alimony, maintenance or support.

11 U.S.C. § 523(a)(5) (1994). Thus, under § 523(a)(5), a debt

that is "actually in the nature of alimony, maintenance or

support" of a spouse, former spouse, or child of the debtor"

is nondischargeable in bankruptcy. 

In 1994, Congress expanded the exception to discharge for

marital obligations by adding § 523(a)(15) to the Bankruptcy

Code. Section 523(a)(15) renders nondischargeable any debt:
6

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 dependant of the debtor and, if the debtor is

engaged in 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.

Id. § 523(a)(15). Section 523(a)(15) excepts from discharge

those debts arising out of marital dissolution proceedings that

do not constitute nondischargeable alimony, maintenance or

support under § 523(a)(5); i.e. property settlement awards.

The legislative history of this provision indicates that it was

added to the Bankruptcy Code to provide greater protection for

nondebtor divorcing spouses who agree to take reduced alimony

and support payments in exchange for an increased property

settlement. H.R. REP. NO. 103-385, at 54 (1994), reprinted in

1994 U.S.C.C.A.N. 3340, 3363. Thus, while a debtor's

obligation to make a settlement of marital property would be

dischargeable under § 523(a)(5), such an obligation is

nondischargeable under § 523(a)(15), with two important

exceptions: (1) subsection (A) of § 523(a)(15) provides that

a property settlement award arising out of divorce proceedings

is dischargeable where the debtor does not have the ability to

pay the debt from disposable income; and (2) subsection (B)

provides that such a property settlement award is dischargeable

where discharging such debt would result in a benefit to the

debtor that outweighs the detrimental consequences to the
7

nondebtor spouse. See Jodoin v. Samayoa (In re Jodoin), 209

B.R. 132, 139 (B.A.P. 9th Cir. 1997); Schaefer v. Deppe (In re

Deppe), 217 B.R. 253, 259 (Bankr. D. Minn. 1998); Johnson v.

Rappleye (In re Rappleye), 210 B.R. 336, 340 (Bankr. W.D. Mo.

1997); Williams v. Williams (In re Williams), 210 B.R. 344, 346

(Bankr. D. Neb. 1997); Wellner v. Clark (In re Clark), 207 B.R.

651, 655-56 (Bankr. E.D. Mo. 1997).
8

As we have previously stated, the question of whether a

particular debt constitutes "alimony, maintenance or support"

or rather constitutes a property settlement is a question of

federal bankruptcy law, not of state law. Tatge v. Tatge (In

re Tatge), 212 B.R. 604, 608 (B.A.P. 8th Cir. 1997) (citing

Williams v. Williams (In re Williams), 703 F.2d 1055, 1056 (8th

Cir. 1983) (quoting H.R. REP. NO. 95-595, at 364 (1977))). The

crucial issue in making this determination is the intent of the

parties and the function the award was intended to serve at the

time of the divorce. Holliday v. Kline (In re Kline), 65 F.3d

749, 751 (8th Cir. 1995); Adams v. Zentz, 963 F.2d 197, 200

(8th Cir. 1992); Williams, 703 F.2d at 1056; Boyle v. Donovan,

724 F.2d 681, 683 (8th Cir. 1984). Factors to be considered

by the courts in determining whether an award arising out of

marital dissolution proceedings was intended to serve as an

award for alimony, maintenance or support, or whether it was

intended to serve as a property settlement include, but are not

limited to: the relative financial conditions of the parties

at the time of the divorce; the respective employment histories

and prospects for financial support; the fact that one party

or another receives the marital property; the periodic nature

of the payments; and whether it would be difficult for the

former spouse and children to subsist without the payments.

Tatge, 212 B.R. at 608; Kubik v. Kubik (In re Kubik), 215 B.R.

595, 599 (Bankr. D.N.D. 1997). The bankruptcy court's

determination of this issue constitutes a finding of fact that

may be reversed only if it is clearly erroneous under the

evidence presented. First Nat'l Bank v. Pontow, 111 F.3d 604,

609 (8th Cir. 1997); Kline, 65 F.3d at 750; Adams, 963 F.2d at

200; Williams, 703 F.2d at 1056. 

Applying these principles to the first part of the

bankruptcy court's holding, we have no trouble affirming the

bankruptcy court's determination that Michael's obligations to

pay alimony, medical expenses and the psychologist's bill are

nondischargeable under § 523(a)(5). The record before us
9

indicates that, in ordering Michael to pay these debts, the

divorce court was concerned with balancing the income and

earning capacities of the parties and with providing for the

proper care and support of Nicole. Thus, we hold that the

bankruptcy court's finding that these debts were intended to

serve the function of "alimony, maintenance or support" was not

clearly erroneous.
10

We reach a different conclusion with respect to the

bankruptcy court's holding that Michael's obligation to pay

Martha $10,392 plus interest is nondischargeable under §

523(a)(15), however. Although the court's finding that this

debt was intended to serve the function of a property

settlement rather than an award of alimony, maintenance or

support is supported by the evidence, we believe that the

bankruptcy court incorrectly applied the law in this case in

two respects. First, the bankruptcy court found the property

settlement debt in this case nondischargeable despite its

specific finding that "the debtor does not have the ability to

pay his obligations to his former spouse from income or

property which is not reasonably necessary to be expended for

his maintenance or support, and the support of his child,

through child support payments." As discussed above, a

property settlement award that otherwise qualifies for

nondischargeability under § 523(a)(15) will be nevertheless

dischargeable in bankruptcy if either of the two exceptions

contained in subsections (A) and (B) apply. The bankruptcy

court's finding, if upheld, would indicate that subsection (A)

of § 523(a)(15) has been satisfied in this case and that the

property settlement debt should therefore be dischargeable by

the debtor.

Second, we think that the bankruptcy court improperly

allocated the burden of proof in this case. In making its

finding that Michael did not have the ability to pay under §

523(a)(15)(A), the bankruptcy court indicated that the evidence

on Michael's ability to pay his debts was incomplete; that

Michael's testimony was not credible; that Michael failed to

recall specific information; that he was evasive and

argumentative; and that he did not respond directly to

questions asked of him. Despite this apparent failure of proof

on the debtor's part, the bankruptcy court held that the burden

fell on the objecting creditor to prove the inapplicability of

an exception to nondischargeability under § 523(a)(15)(A), and
11

concluded that the debtor did not have the ability to pay

because Martha had failed to prove otherwise. Although

"several courts have grappled with the issue of burden proof"

in § 523(a)(15) cases, see Crossett v. Windom (In re Windom),

207 B.R. 1017, 1020-21 (Bankr. W.D. Tenn. 1997), we think that

the burden of proof lies with the debtor to show that an

exception to nondischargeability under § 523(a)(15)(A) or (B)

applies in a given case. It is true that in general the burden

falls on the objecting creditor to prove an exception to

discharge under § 523; nevertheless the majority of courts have

ruled that, once the objecting 
12

creditor proves that the debt constitutes a property settlement

award incurred in the course of divorce proceedings, the burden

shifts to the debtor to prove either of the exceptions to

nondischargeability contained in subsections (A) or (B). See

Jodoin, 209 B.R. at 139; Rappleye, 210 B.R. at 340; Williams,

210 B.R. at 346; Clark, 207 B.R. at 655-56; Scigo v. Scigo (In

re Scigo), 208 B.R. 470, 473 (Bankr. D. Neb. 1997); Wynn v.

Wynn (In re Wynn), 205 B.R. 97, 101 (Bankr. N.D. Ohio 1997);

Schmitt v. Eubanks (In re Schmitt), 197 B.R. 312, 316 (Bankr.

W.D. Ark. 1996); Johnston v. Henson (In re Henson), 197 B.R.

299, 302-03 (Bankr. W.D. Ark. 1996); Bodily v. Morris (In re

Morris), 193 B.R. 949, 952 (Bankr. S.D. Cal. 1996). See also

Kirchner v. Kirchner (In re Kirchner), 206 B.R. 965, 970

(Bankr. W.D. Mo. 1997); Florio v. Florio (In re Florio), 187

B.R. 654, 657 (Bankr. W.D. Mo. 1995); Silvers v. Silvers (In

re Silvers), 187 B.R. 648, 649 (Bankr. W.D. Mo. 1995) (holding

that the debtor bears the burden of going forward with respect

to § 523(a)(15)(A) and (B), but not the burden of proof). But

see Marquis v. Marquis (In re Marquis), 203 B.R. 844, 847

(Bankr. D. Me. 1997); Greenwalt v. Greenwalt (In re Greenwalt),

200 B.R. 909 (Bankr. W.D. Wash. 1996); Willey v. Willey (In re

Willey), 198 B.R. 1007 (Bankr. S.D. Fla. 1996); Dressler v.

Dressler (In re Dressler), 194 B.R. 290, 302-03 (Bankr. D.R.I.

1996); Kessler v. Butler (In re Butler), 186 B.R. 371, 373-74

(Bankr. D. Vt. 1995) (holding that the objecting creditor has

the burden of proving that the exceptions to

nondischargeability contained in § 523(a)(15)(A) and (B) do not

apply). We believe that the statutory language of § 523(a)(15)

indicates that the exceptions contained in subsections (A) and

(B) constitute affirmative defenses to nondischargeability

which must be proven by the debtor to escape

nondischargeability of the disputed debt. Therefore, although

the bankruptcy court found that the debtor did not have the

ability to pay his debts from disposable income under §

523(a)(15)(A), we conclude that the bankruptcy court improperly

placed the burden of satisfying this test on the objecting
13

creditor, rather than on the debtor. Accordingly, we believe

that the bankruptcy court's decision under § 523(a)(15) must

be reversed and remanded to the bankruptcy court for new

findings of fact while placing the burden on the debtor to

prove either of the exceptions to nondischargeability contained

in § 523(a)(15)(A) or (B).
14

III. CONCLUSION

We conclude that the bankruptcy court's decision under §

523(a)(5) should be affirmed, but that the bankruptcy court's

decision under § 523(a)(15) incorrectly applied the law and

improperly allocated the burden of proof. Accordingly, the

bankruptcy court's decision is AFFIRMED IN PART, REVERSED IN

PART, and REMANDED for further proceedings consistent with this

opinion.

A true copy.

Attest:

CLERK, U.S. BANKRUPTCY APPELLATE PANEL

FOR THE EIGHTH CIRCUIT