Mr. Hohenberg, as debtor, was divested of his prepetition interests in property when he filed his bankruptcy petition, and those bankruptcy estate interests did not become a part of the marital estate subject to classification and equitable division in the divorce proceeding except to the extent that they were properly exempted from the bankruptcy estate or except to the extent that the nondebtor spouse might have a monetary claim against the bankruptcy estate. See Hohenberg v. Hohenberg (In re Hohenberg), 143 B.R. 480, 487 (Bankr. W.D.Tenn. 1992). It is specifically Sarah Hohenberg's position that property separately owned by her at the time of the filing of this bankruptcy in 1991 was not included in the bankruptcy estate and can not become a part of the bankruptcy estate through the present adversary proceeding filed by the trustee.
This increases the possibility of a collusive award. See Hohenberg v. Hohenberg (In re Hohenberg), 143 B.R. 480, 488 (Bankr.W.D.Tenn. 1992). Once embodied in a state court decree, it may become virtually unassailable in bankruptcy court:
The Sixth Circuit has adopted the position that the state domestic relations court must first determine the ownership rights of the debtor and his estranged spouse in an equitable distribution proceeding and then the bankruptcy court exercises exclusive jurisdiction over the property which is awarded to the debtor. In re White, 851 F.2d 170 (6th Cir. 1988); In re Hohenberg, 143 B.R. 480, 485 (Bankr.W.D.Tenn. 1992). Under this scenario, the nondebtor spouse takes the marital property awarded to him or her free of the claims of the debtor-spouse's creditors — a result which we find untenable. The evil in this resolution is that the division of assets between spouses may take place in the absence of any consideration by any court of the impact upon creditors.
W.D.Tenn.1996) (based upon § 523(c), a bankruptcy court "has exclusive jurisdiction to determine if the debt in question is nondischargeable" under § 523(a)(15)); In re Smither, 194 B.R. 102, 106 (Bankr. W.D.Ky.1996) (§ 523(c) grants concurrent jurisdiction over § 523(a)(5) support issues but exclusive jurisdiction exists over § 523(a)(15) property settlement issues); Thaggard v. Pate (In re Thaggard), 180 B.R. 659, 661-62 (M.D.Ala.1995) (state courts have concurrent jurisdiction over § 523(a)(5) nondischargeability matters); Hohenberg v. Hohenberg (In re Hohenberg), 143 B.R. 480, 483 (Bankr.W.D.Tenn. 1992) (a state court has concurrent jurisdiction with bankruptcy courts to determine whether a debt is nondischargeable under § 523(a)(5) as support); Dodge v. LaCasse (In re LaCasse), 238 B.R. 351, 354 (Bankr.W.D.Mich.1999) ("In § 523(a)(5) matters the bankruptcy court has concurrent jurisdiction with state courts.") (citing In re Moralez, 128 B.R. 526 (Bankr.E.D.Mich.1991)). 2.
Until the state court classifies and equitably divides the marital property, what is property of the bankruptcy estate is unclear." Hohenberg v. Hohenberg (In re Hohenberg), 143 B.R. 480, 485 (Bankr. W.D.Tenn. 1992) (citations omitted).3. The "Chosen" Path
The jurisdiction to determine the right to and grounds for a divorce falls exclusively with the state court, and a state court action as it pertains to those issues should not be stayed. See In re Hohenberg, 143 B.R. 480, 483 (Bankr. W.D.Tenn. 1992) (citations omitted). The same is true for maintenance or support awards.
In that situation, § 544 might operate to avoid a judgment lien because on the date of bankruptcy a hypothetical lien creditor could take free of a nondebtor spouse's unperfected interest in property, because that interest did not vest until the divorce action was filed. Hohenberg v. Hohenberg (In re Hohenberg), 143 B.R. 480, 487 (Bankr.W.D.Tenn. 1992). White argues that the same result should apply even though the divorce was filed before the intervention of bankruptcy in this case.
As some measure of protection for creditors of the bankruptcy estate, these courts have instructed that the creditors or the trustee participate in the state court proceedings. See, e.g., Hohenberg v. Hohenberg (In re Hohenberg), 143 B.R. 480, 489-90 (Bankr.W.D.Tenn. 1992). Courts have also prohibited consensual agreements between the debtor and the ex-spouse to prevent collusion to the detriment of the creditors. See id. at 488.
Harding's right to payment did not arise until a judgment was entered on the divorce decree awarding Harding alimony. See In re Hohenberg, 143 B.R. 480, 483 (Bankr.W.D.Tenn. 1992) (underlying obligations of alimony, support and maintenance are issues within the exclusive domain of the state courts); Sandra D. Freeburger and Claude Bowles, What Divorce Court Giveth, Bankruptcy Court Taketh Away, 24 J.Fam.L. 587, 604 (1985-86) (state court decides if a legal obligation to pay alimony should arise). Accordingly, Murray's intervening bankruptcy had no effect on Harding's post-bankruptcy right to alimony and separate maintenance.
"In the normal case, the state court therefore defines what the debtor's rights are in the marital property and then the bankruptcy court exercises exclusive jurisdiction over the debtor's property which has become property of the bankruptcy estate." Hohenberg v. Hohenberg, 143 B.R. 480, 485 (Bankr. W.D. Tenn. 1992). As another bankruptcy court noted, "`[a] property settlement involves an inquiry into factors regularly considered by state courts in divorce proceedings, an inquiry which I would find is best left to the state courts.'" Robbins, 964 F.2d at 346 (quoting In re Heslar, 16 B.R. 329, 333 (Bankr. W.D. Mich. 1981)).