Opinion
Case No. 99-72809, Adversary No. 99-7L186
August 23, 1999
OPINION
This matter came before the Court on Plaintiff's Second Motion for Summary Judgment.
On June 28, 1986, Plaintiff and Defendant were married.
During the marriage, Plaintiff and Defendant had five children. On August 10, 1999, a Judgment of Dissolution of Marriage was entered.
The Judgment ordered Plaintiff to pay child support and certain debts, including a home mortgage, debt secured by a van, medical, dental and counseling bills, two appraisal fees and $2,500 of Defendant's attorney fees. Paragraph H of the Judgment orders that each party hold the other harmless from the debts they are ordered to pay, and that the debts Plaintiff is ordered to assume and pay are in the nature of support for the Defendant and the minor children and are, therefore, not dischargeable in bankruptcy.
Thirteen days after the entry of the Judgment of Dissolution of Marriage, Plaintiff filed his voluntary Chapter 7 petition. On November 18, 1999, Plaintiff filed his two-count adversary complaint to determine the dischargeability of the debts (but not the child support obligation, which Plaintiff concedes is nondischargeable) set forth in the Judgment. Count I seeks a finding that the subject indebtedness is dischargeable pursuant to 11 U.S.C. § 523(a)(15)(A). Count II seeks a finding that the subject indebtedness is dischargeable pursuant to 11 U.S.C. § 523 (a)(5)(B).
On July 26, 2000, the Appellate Court of Illinois, Fourth District, affirmed the judgment of the trial court. On August 24, 2000, Plaintiff filed his Second Motion for Summary Judgment wherein he asserts that the subject debts are dischargeable under 11 U.S.C. § 523(a)(15)(A) and 11 U.S.C. § 523(a)(5)(B) as a matter of law.
In order to prevail on a motion for summary judgment, Plaintiff must meet the statutory criteria set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 56(c) states in part as follows:
[T]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c). See also Dugan v. Smerwick Sewerage Co., 142 F.3d 398, 402 (7th Cir. 1998). The primary purpose for granting a summary judgment motion is to avoid unnecessary trials when there is no genuine issue of material fact in dispute. Trautvetter v. Quick, 916 F.2d 1140, 1147 (7th Cir. 1990). The burden is on the moving party to show that no genuine issue of material fact is in dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Matsushita Electric Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-86; Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). All reasonable inference drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Parkins v. Civil Constructors of Illinois, Inc., 163 F.3d 1027, 1032 (7th Cir. 1998). "Summary judgment is not an appropriate occasion for weighing the evidence; rather the inquiry is limited to determining if there is a genuine issue for trial." Lohorn v. Michal, 913 F.2d 327, 331 (7th Cir. 1990).
11 U.S.C. § 523(a)(15)(A) provides in pertinent part as follows:
(a) A discharge under section 727 . . . of this title does not discharge an individual debtor from any debt —
(15) 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 . . . 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 dependent of the debtor. . .(.)
To prevail under § 523(a)(15)(A), the debt in question must be other than the type set forth in § 523(a)(5), that was awarded by a court in the course of a divorce proceeding or separation. In re Paneras, 195 B.R. 395, 403 (Bankr.N.D.Ill. 1996) citing In re Silvers, 187 B.R. 648, 649 (Bankr.W.D.Mo. 1995). Once this is established, the burden of proving that the debt falls within either of the two exceptions to nondischargeability rests with the debtor. In re Crosswhite, 148 F.3d 879, 884-85 (7th Cir. 1998).
Hence, once the creditor's initial proof that the claim falls under § 523(a)(15) of the Bankruptcy Code is made, the debt is excepted from discharge and the debtor is responsible for the debt unless the debtor can prove either of the two exceptions, subpart (A), the "ability to pay" test, or (B), the "detriment" test. Id., 148 F.3d at 885.
Plaintiff relies solely on subpart (A), the "ability to pay" test.
If the debtor can show the inability to pay the debt, the examination stops and the debtor prevails. The debt will remain dischargeable if paying the debt would reduce the debtor's income below that necessary for the support of the debtor and the debtor's dependents. In re Jenkins, 202 B.R. 102, 104 (Bankr.C.D.Ill. 1996); In re Hill, 184 B.R. 750, 754 (Bankr.N.D.Ill. 1995).
Because this language mirrors the disposable income test found in 11 U.S.C. § 1325(b)(2), most courts utilize an analysis similar to that used in determining disposable income in Chapter 13 cases.
Id. at 755; In re Smither, 194 B.R. 102, 108 (Bankr.W.D.Ky. 1996); In re Carroll, 187 B.R. 197, 200 (Bankr.S.D.Ohio 1995); In re Phillips, 187 B.R. 363, 369 (Bankr.M.D.Fla. 1995); In re Hesson, 190 B.R. 229, 237 (Bankr.D.Md. 1995). A debtor's financial condition is to be measured at the time of trial. In re Douglas, 202 B.R. 961, 965 (Bankr.S.D.Ill. 1996). See also In re Hesson, 190 B.R. 229, 238 (Bankr.D.Md. 1995); In re Taylor, 191 B.R. 760, 766-67 (Bankr.N.D.Ill. 1996) aff'd sub nom Taylor v. Taylor, 199 B.R. 37 (N.D.Ill. 1996); cf. In re Hill, 184 B.R. 750, 754 (Bankr.N.D.Ill. 1995) (the appropriate measuring point is the date of the filing of the complaint).
In order to grant the Second Motion for Summary Judgment and find the subject debts dischargeable under 11 U.S.C. § 523 (a)(15)(A), the Court would have to conclude, as a matter of law, that Plaintiff does not have the ability to pay the subject debt at this time. There is some evidence in the record to suggest that this may be the case. Plaintiff did file an affidavit on May 4, 2000, wherein he affirms that the amounts reflected on his Schedule I and Schedule J truly reflect his income and expenses as of the petition date. However, as stated above, Plaintiff's financial condition is to be measured at the time of trial (or perhaps, theoretically, at the time a dispositive motion is made).
In addition, in her affidavit filed June 7, 2000, Defendant states that Plaintiff is highly skilled, educated and employable, but was, and perhaps still is, unemployed by his own choice. It well may be that Plaintiff is now gainfully employed, and perhaps he has acquired non-exempt property post-petition. Clearly, these are factual issues which preclude summary judgment on Count I of Plaintiff's Complaint.
11 U.S.C. § 523(a)(5)(B) provides in relevant part as follows:
(a) A discharge under section 727 . . . of this title does not discharge an individual debtor from any debt —
(5) 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 . . ., but not to the extent that —
(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(.)
A debt owed to a former spouse or a debt to be paid to a third party in the nature of alimony, maintenance or support pursuant to a divorce decree is nondischargeable in bankruptcy under § 523(a)(5). In determining whether an obligation is a liability for alimony, maintenance or support, the Court must look to the substance of the obligation and not to labels imposed by state law. In re Woods, 561 F.2d 27, 29 (7th Cir. 1977); In re Maitlen, 658 F.2d 466, 468 (7th Cir. 1981); In re Seidel, 48 B.R. 371 (Bankr. C.D. Ill. 1984).
While there is no single widely-accepted test or criteria for determination of the question of dischargeability under § 523(a)(5), there are several criteria for deciding the issue which have been widely applied. By far the two most important criteria are: (1) the intentions of the parties and/or the divorce court at the time the obligation was incurred, and (2) the effect and function of the obligation imposed. In re Kearney, Slip Op. at 3, No. 92-70102, Adv. No. 92-7072 (Bankr.C.D.Ill. August 11, 1992). Obviously, the intentions of the parties and the effect and function of the obligations imposed are factual questions.
Defendant's affidavit clearly indicates that she strongly disagrees with Plaintiff on these questions. Accordingly, summary judgment is not appropriate for disposition of Count II of the Complaint.
For the reasons set forth above, Plaintiff's Second Motion for Summary Judgment is denied.
This Opinion is to serve as Findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.
ORDER
For the reasons set forth in an Opinion entered this day,
IT IS HEREBY ORDERED that Plaintiff's Second Motion for Summary Judgment be and is hereby denied.