Opinion ID: 853860
Heading Depth: 3
Heading Rank: 2

Heading: Cowart's Remaining Obligations under the 1996 Decree

Text: The Bankruptcy Code explicitly excepts some of a debtor's obligations from discharge. Section 523(a)(5) provides that no discharge applies to 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.... 11 U.S.C. § 523(a)(5) (1994 & Supp.1996); see also 6 GOLDSTEIN ET AL., COLLIER ON BANKRUPTCY ¶ 727.01[1] (15th ed. 1996) & 4 GOLDSTEIN ET AL., COLLIER ON BANKRUPTCY ¶ 523.11[1] (15th ed.1996). Federal law governs what constitutes a nondischargeable maintenance or support obligation. In re Hart, 130 B.R. 817, 835 (Bankr.N.D.Ind.1991); SOMMER & McGARITY, supra, at ¶ 6.03[2]. State courts nonetheless have concurrent jurisdiction to make that determination. 4 GOLDSTEIN, supra, at ¶ 523.03. The trial court found that the obligation[s] of the Petitioner herein are not dischargeable in bankruptcy because all obligations owed to [White] are in the nature of support and maintenance. To be nondischargeable an obligation must be payable to or on behalf of a former spouse and must also be in the nature of alimony, maintenance or support. In re Scott, 194 B.R. 375, 378 (Bankr.D.S.C. 1995). Whether the obligation is in the nature of maintenance or support is determined by the underlying reason the debtor is required to make the payment. Id. at 379. As a general proposition, if the obligation was created to provide for the daily needs of the former spouse it is in the nature of alimony, maintenance or support. 4 GOLDSTEIN, supra, at ¶ 523.11[6][b]; see also In re Calhoun, 715 F.2d 1103 (6th Cir.1983). In contrast, if the payment obligation is directly linked to the sale of identifiable property, the obligation is more likely to be part of property division and therefore dischargeable. 4 GOLDSTEIN, supra, at ¶ 523.11[6][c]. Finally, an obligation to be paid in a lump sum or over a short period of time is more likely to be considered a property settlement. Id. at ¶ 523.11[6][e]. The trial court reasoned that all obligations under the 1996 decree were in the nature of maintenance or support because Cowart's failure to pay his obligations under the decree in turn affected White's ability to pay child support back to Cowart. This ground is not a proper basis for concluding that the obligations are nondischargeable. The fact that the payment by the debtor may result in the former spouse's having funds available to pay child support is not sufficient to render the obligation one in the nature of maintenance or support. See In re Calhoun, 715 F.2d at 1108-09 (maintenance or support is not broad enough to encompass joint debts, which if paid by one provides the other funds with which to support himself or herself). Some of the obligations found in the 1996 decree may nonetheless be nondischargeable as maintenance or spousal support for other reasons. In this case the trial court ordered Cowart to pay several items as damages. These included property taxes paid by White, appraisal fees paid by White, attorney fees owed to White's dissolution counsel, a Visa bill that predated the dissolution, and the amount due to White as damages for failing to carry out the order to sell the two properties. The initial question is which of these, if any, survived Cowart's bankruptcy discharge.
The 1996 decree ordered Cowart to pay $1,171 in back property taxes to redeem the property awarded to White and an unspecified amount of past due taxes on the other properties that he had been initially ordered to pay in the preliminary order. Cowart failed to pay the taxes and White paid them in an effort to prevent tax sales. The 1997 order ordered Cowart to reimburse White for these amounts. The obligation to reimburse White for back taxes is not nondischargeable in the nature of a maintenance or support obligation. The 1996 decree essentially divided the responsibility to pay the debts of the marriage between Cowart and White. The court assigned the responsibility to pay the taxes to Cowart. There is no indication that the trial court intended this obligation to be in the nature of maintenance or support. Moreover, the taxes cannot be characterized as providing for White's daily needs because they do not secure her residence. In sum, Cowart's obligation to White to pay the taxes under the 1996 decree was discharged as a pre-petition debt. The trial court also ordered Cowart to pay the Visa bill in the 1997 order. The Visa bill was a pre-petition debt that was discharged by Cowart's bankruptcy.
The 1996 decree ordered Cowart to pay White's dissolution attorney fees in the amount of $14,521. The obligation to pay attorney fees may be nondischargeable in bankruptcy if it is in the nature of maintenance or support. See In re Balvich, 135 B.R. 327, 338 (Bankr.N.D.Ind.1991), aff'd 135 B.R. 323 (N.D.Ind.1991); In re Knabe, 8 B.R. 53, 56-57 (Bankr.S.D.Ind.1980). In exercising its discretion to award attorney fees under Indiana Code § 31-15-10-1, a trial court is required to consider the resources of the parties, their relative economic circumstances, and their ability to engage in gainful employment and earn adequate income. Barnes v. Barnes, 549 N.E.2d 61, 66 (Ind.Ct. App.1990); Euler v. Euler, 537 N.E.2d 554, 557 (Ind.Ct.App.1989). Accordingly, federal courts have held that an award of attorney fees based on the financial resources of the parties, ... ordinarily indicates that the award is in the nature of maintenance or support. In re Balvich, 135 B.R. at 337 (quoting In re Kijewski, 91 B.R. 48, 50 (Bankr.N.D.Ill.1988)). In contrast, if attorney fees are not based on financial need they will be found to be property settlement debts dischargeable under section 523(a)(5). SOMMER & McGARITY, supra, at ¶ 6.05[1]. In this case, the trial court's 1996 decree awarded a larger share of the property sale proceeds to White observing that White worked only part-time during the marriage and that the Court of Appeals had approved a similar distribution where the husband had superior or future earning ability. The trial court did not make a similar observation as to the relative earning power of the parties when it awarded attorney fees. A court may order a former spouse to pay rehabilitative maintenance for a period of up to three years after considering: the education level of each spouse, whether an interruption in training or employment was a result of homemaking or child care responsibilities, the earning capacity of each spouse and the time and expense necessary for the spouse to acquire sufficient education and training to find appropriate employment. See IND.CODE § 31-15-7-2(3) (1998). Although the trial court clearly had discretion to award the attorney fees as maintenance, we are unable to conclude whether the fees were awarded as maintenance or support. Because, as explained below, a remand is necessary for other reasons, we leave it to the trial court to resolve whether the award of attorney fees was designed to provide White with resources to assist her in maintaining her lifestyle after dissolution or, in other words, maintenance. If so, Cowart's obligation to pay those fees survived his bankruptcy and Trial Rule 69 is available to enforce this obligation under the 1996 decree against Cowart.
The trial court ordered Cowart to reimburse White for real estate appraisal fees in the amount of $400 for the dissolution proceeding and $400 for the contempt proceeding. The fee for the contempt appraisal was incurred after Cowart converted to Chapter 7, so his discharge does not affect that debt. However, the fee incurred as part of the dissolution was a prebankruptcy debt that was discharged unless it was in the nature of maintenance or support. The appraisal fee was to be paid to White in a lump sum and was reimbursement for a specific transaction. As such it did not provide for White's daily needs. Unlike attorney fees, the trial court was not required to consider the economic condition of the parties in ordering Cowart to pay this cost. Accordingly, the appraisal fee incurred in the dissolution proceeding was not in the nature of maintenance or support and was discharged by Cowart's bankruptcy. In sum, with respect to the monetary obligations under the 1996 decree, we conclude that Cowart's obligations to pay property taxes, the Visa bill and the appraisal fee for the dissolution were discharged in bankruptcy. We remand for a determination whether the attorney fees were in the nature of maintenance or support. In addition, other obligations Cowart incurred after November 5, 1996, including the real estate appraisal fee for the contempt proceeding, were not discharged.