Opinion ID: 2271826
Heading Depth: 1
Heading Rank: 14

Heading: Citizens Bank Loan

Text: After Connect Corporation went into receivership in 1997, Andrew met with Citizens Bank in an effort to work out the outstanding business debt that he and Dorothy personally had guaranteed. Andrew testified that Dorothy wasn't willing to participate in the meeting, and no settlement affording them relief was reached. As a result of Dorothy's 2002 bankruptcy filing, she no longer had any obligation to Citizens Bank on the loan. The trial justice found that, although Dorothy was discharged of that debt as a consequence of her bankruptcy filing in 2002, Dorothy was nonetheless responsible to reimburse [Andrew] for her one-half of that debt. In a flip worthy of an Olympic gymnast, Dorothy argues in her cross-appeal that the trial justice erred when she ordered Dorothy to pay one-half of the debt owed on the Citizens Bank loan. She contends that her obligation to honor her guarantee of the loan was discharged as a result of her bankruptcy and because that obligation involved neither alimony nor support, it was error to order her to reimburse Andrew for half of the debt. In a response equally impressive as a complete reversal of his position on the Shore Road co-op, Andrew argues that although a debt may be discharged in bankruptcy between the debtor and third-party creditor, the Family Court may assign such discharged debts between divorcing spouses. We agree with Andrew and hold that the trial justice did not err when she ordered Dorothy to pay one-half of the outstanding loan. As we have explained above, although a Bankruptcy Court order that discharges a debt is final concerning a spouse-debtor and third-party creditors, it is not final between divorcing spouses. Hopkins, 487 A.2d at 504. However, Dorothy argues that Hopkins is distinguishable from this case because Hopkins dealt with a conditional waiver of alimony, while here, alimony is not at issue. See id. at 502. In Hopkins, 487 A.2d at 502, the final judgment dissolving the Hopkins' marriage provided that the former wife waived alimony on the condition that her former husband indemnify her if she became liable on certain debts. Subsequently, the husband filed for bankruptcy and the Bankruptcy Court ruled that the debts were the result of a property settlement rather than an award of alimony and, hence, ordered the debts discharged. Id. The Family Court ordered the husband to indemnify the wife pursuant to the conditional waiver of alimony set forth in the divorce decree despite the discharge in bankruptcy. This Court affirmed, because the discharge of the husband's obligations to third-party creditors in no way released him from the obligations assumed under the original Family Court decree. Id. at 505. Dorothy's discharge in bankruptcy as to the Citizens Bank loan freed her from her obligation as to Citizens Bank. We agree with her that equitably distributed debts that are meant as a property settlement rather than for support of the former spouse are dischargeable in bankruptcy. In re McCartin, 145 B.R. 118, 119 (Bankr.D.R.I.1992). However, this did not preclude the Family Court from requiring Dorothy to indemnify Andrew for a portion of the debt after it weighed the statutory factors governing equitable distribution. See Hopkins, 487 A.2d at 504. The trial justice gave careful thought to Dorothy's refusal to participate in the negotiations on the Citizens Bank loan when she found Dorothy to be responsible for half that debt. It was within the discretion of the trial justice to assign half that debt to Dorothy, and we hold that she did not abuse her discretion when she did so.