Opinion
No. 01-80081
March 26, 2001
Pamela S. Wilcox, Stoerzbach, Morrison, Robertson, Wilcox Alcorn, Galesburg, IL.
Kameron A. Miller, Carthage, IL.
Mr. Michael D. Clark, Peoria, IL.
U.S. Trustee, Peoria, IL.
OPINION
A Chapter 13 Plan, to be confirmable, must provide for full payment of all priority claims, including a divorce court ordered obligation for child support. In dispute is whether the priority treatment for a child support obligation applies only so long as the child is a minor.
The marriage of Randal Voss and Connie Voss was dissolved by order of the Hancock County, Illinois, Circuit Court on July 20, 1998. The Judgment of Dissolution of Marriage was entered by agreement of the parties and comprehensively dealt with issues of child custody, support and property distribution. Connie Voss was awarded custody of two minor children. A third child, Darcie, had already attained the age of majority (18 years) when the Judgment of Dissolution was entered.
Randal Voss was ordered to make bi-weekly child support payments to Connie Voss for the support of the minor children. As to medical insurance and expenses, the Judgment of Dissolution provides as follows:
That the Petitioner shall continue to maintain the current medical insurance coverage he has for and on behalf of the 3 children of these parties through his place of employment as long as the children shall remain eligible to be covered by such insurance. The Petitioner and the Respondent shall each be responsible to the extent of 50% for all uninsured medical, dental, optical, prescription drug expenses, surgical and orthodontic expenses incurred for and on behalf of the children, including any applicable deductible.
No major medical expense shall be incurred for and on behalf of the children of these parties (excepting emergency situations) until such time as the other party is notified of the proposed major medical expense to be incurred.
With regard to Darcie's college expenses, the Judgment of Dissolution provides as follows:
That the question of contribution by each of the parties towards the college education expenses of Darcie Voss as it pertains to her enrollment at Illinois State University, Normal, Illinois, is hereby reserved until such time as the child has been notified as to the amount of financial assistance she will be receiving for the 1998-99 school year. If the parties cannot agree as to the amount of contribution each shall make toward these college expenses, this matter may be brought before the Court for determination by either party.
Randal Voss remarried and filed a joint Chapter 13 petition with his new wife on January 8, 2001. Their Chapter 13 Plan provides for payment of a single priority claim to the Internal Revenue Service for a tax debt. Connie Voss objected to the Plan on the basis that Randal owed her a prepetition debt in the amount of $2,296.46 for his share of uninsured medical expenses for services rendered to the children, and that this debt was a child support obligation that must be paid in full through the Plan. The Debtors responded (and Connie agrees) that only $603.84 of the uninsured medical expenses were incurred for the minor children, and that the balance of $1,692.62 was for medical expenses incurred by Darcie. The Debtors contend that only Randal's obligation to pay one-half of the medical expenses for the minor children is a debt that is in the nature of support entitled to priority treatment. Connie claims that Randal's obligation to pay one-half of Darcie's uninsured medical expenses is also in the nature of a priority support obligation despite Darcie's majority.
Prior to the bankruptcy filing, Connie filed two petitions in the Hancock County Circuit Court seeking to compel Randal to pay his one-half share of the uninsured medical expenses. The petitions indicate that the medical expenses incurred for the benefit of Darcie were incurred while she was a full time student attending Carl Sandburg College.
A Chapter 13 Plan must provide for full payment of all claims entitled to priority under Section 507 of the Bankruptcy Code. 11 U.S.C. § 1322(a)(2). Section 507(a) of the Bankruptcy Code creates, in descending order, nine (9) tiers of priority claims. Section 507(a)(7) provides as follows:
Seventh, allowed claims for debts 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 such debt —
(A) is assigned to another entity, voluntarily, by operation of law, or otherwise; or
(B) includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance or support.
Because the language of Section 507(a)(7) parallels that of Section 523(a)(5), courts appropriately rely on case law interpreting Section 523(a)(5) as guiding precedent in construing Section 507(a)(7). See, In re Pearce, 245 B.R. 578, 582-583 (Bkrtcy. S.D. Ill. 2000).
Section 507(a)(7) sets out three requirements that must be met in order for a debt to be accorded priority status: (1) the underlying debt must be in the nature of alimony, maintenance, or support; (2) the debt must be owed to a spouse, former spouse, or child of the debtor; and (3) the debt must be incurred in connection with a separation agreement, divorce decree or property settlement agreement. The latter two are readily disposed of. Randal Voss' obligation to pay one-half of Darcie's medical expenses arises directly and solely out of the Judgment of Dissolution of Marriage, thereby satisfying the third element. With regard to the second element, the Judgment provides that Randal and Connie "shall each be responsible to the extent of 50%" for all medical expenses "incurred for or on behalf of the children." This provision clearly obligates Randal to pay one-half of all uninsured medical expenses incurred for his children, including Darcie. Randal's fifty percent liability for Darcie's uninsured medical expenses is for the financial benefit of either or both Connie, his former spouse, and Darcie, his child. Even if, in practice, Randal pays fifty percent of the uninsured medical expenses direct to the medical providers (as opposed to reimbursing Connie or Darcie) his obligation is still a debt owed to his former spouse or child so that the second element is satisfied.
The first sentence of the same paragraph makes reference to the three children of the parties. Elsewhere in the Judgment, references are specifically made to the minor children. Since the provision creating the obligation to pay 50% of all uninsured medical expenses for the children does not contain the limiting reference "minor" and immediately follows a reference to all three children, the medical expense obligation must be construed to include expenses incurred for or on behalf of Darcie.
See, e.g., In re Chang, 163 F.3d 1138 (9th Cir. 1998) (expenses for the benefit of a child, even if payable direct to third parties, are in the nature of support). Accord, In re Dewey, 223 B.R. 559, 564 (10th Cir. BAP 1998).
The heart of the issue before this Court concerns whether Randal's obligation is "in the nature of support" given that Darcie is not a minor. Although this is a question of federal law, the impact of applicable state law should be carefully considered. Since the terms of the Judgment of Dissolution of Marriage were agreed to by Randal and Connie, the inquiry should properly focus on whether they intended that the obligation in question would be a support obligation as opposed to some other kind of obligation. In re Pearce, 245 B.R. 578, 583 (Bkrtcy. S.D. Ill. 2000) (characterization of a debtor's obligation to pay marital debts as either a "support" obligation or an equalization of property rights depends on the parties' intent at the time of dissolution). Since the concept of "support" is a creature of Illinois statute, the Judgment of Dissolution should be construed in light of Illinois law. In re Brodsky, 239 B.R. 365, 371 (Bkrtcy. N.D. Ill. 1999) (state law provides "relevant guidance" as to whether a debt is in the nature of alimony, maintenance or support). Since the Judgment of Dissolution is an agreed order in the nature of a consent decree, it should be interpreted according to its plain language by asking what a reasonable person in the position of the parties would have thought the language meant. Richardson v. Edwards, 127 F.3d 97, 101 (D.C. Cir. 1997). Generally, under Illinois law, child support terminates when a child reaches the age of eighteen, at which time the child attains the age of majority and becomes emancipated. In re Marriage of Ferraro, 211 Ill. App.3d 797, 570 N.E.2d 636, 156 Ill. Dec. 160 (Ill.App. 1 Dist. 1991). Parties to a divorce proceeding may, however, agree as part of the Judgment of Dissolution or in a separate writing that the support of a child will continue beyond emancipation. 750 ILCS 5/510(d). An Illinois divorce court may also order post-majority support for educational expenses incurred in the child's pursuit of a Baccalaureate degree including the payment of the child's medical expenses and dental expenses while in college. 750 ILCS 5/513(a)(2).
The medical expenses at issue were incurred by or for Darcie after she turned eighteen but during a time period in which she was a college student pursuing an undergraduate degree. As such, these expenses are clearly a permissible subject of a support order under Illinois law pursuant to 750 ILCS 5/513. Because Darcie had attained the age of majority at the time that the Judgment of Dissolution was entered, and the parties expressly provided therein for the payment of her uninsured medical expenses, it also appears that the parties satisfied the exception to the general rule that child support terminates upon emancipation, by agreeing to continue to jointly support Darcie through college. 750 ILCS 5/510(d). See In re Marriage of Donahoe, 114 Ill. App.3d 470, 448 N.E.2d 1030, 70 Ill. Dec. 152 (Ill.App. 2 Dist. 1983) (Purpose of section of Marriage and Dissolution of Marriage Act providing that, unless otherwise agreed in writing or expressly provided in judgment, provisions for support of child are terminated by emancipation of child, is to permit parties to agree to remain liable for support of child beyond emancipation.)
It has been held that a debtor's obligation to pay existing third party debts pursuant to a divorce decree may, under certain circumstances, be in the nature of a division of property and not an obligation of support. In re Pearce, 245 B.R. 578 (Bkrtcy. S.D. Ill. 2000). Here, however, Randal and Connie Voss were not allocating existing debts via the Judgment's medical expense payment provision. That provision deals exclusively with prospective indebtedness not existing as of the date of the Judgment. The allocation of existing debts is dealt with in other parts of the Judgment. It is this Court's opinion that Randal and Connie Voss intended the provision for an even split of future medical expenses for and on behalf of the children, including Darcie, to be an obligation in the nature of support.
The Court must now consider whether any overriding federal interest requires a different result.
In a case construing the parallel provision under Section 523(a)(5), Bankruptcy Judge Squires held that a debtor's obligation, contained in a marital settlement agreement and corresponding Judgment for Dissolution of Marriage, to pay the fees for a court-appointed attorney for the debtor's two minor children in the course of a contested marital dissolution proceeding was an obligation in the nature of support and hence nondischargeable under Section 523(a)(5). In re Brodsky, 239 B.R. 365 (Bkrtcy.
N.D. Ill. 1999). In explaining his decision, Judge Squires stated that Section 523(a)(5) should not be construed so narrowly as to exclude everything that bears on the welfare of the child except the payment of child support bills. 239 B.R. at 374. The same policy of inclusion should apply under Section 507(a)(7). See In re Dewey, 223 B.R. 559 (10th Cir. BAP 1998). Payment of Darcie's uninsured medical bills bears directly on her welfare. Moreover, it is generally held that medical expenses are in the nature of support. Matter of Seibert, 914 F.2d 102 (7th Cir. 1990).
This Court is not aware of any federal principle that supports a construction of Section 507(a)(7) so as to exclude support obligations for the children of debtors who have reached the age of majority, where the parties intended to continue to provide for the child's support and are permitted to do so under state law. In fact, several courts have determined post-majority support debts to be nondischargeable under Section 523(a)(5). Richardson v. Edwards, 127 F.3d 97, 101 (D.C. Cir. 1997) (debtor's obligations under a divorce court order and pursuant to a settlement agreement, to pay post-majority child support is nondischargeable under Section 523(a)(5) even where the legal duty to pay child support under state law ceased at majority); In re Seixas, 239 B.R. 398 (9th Cir. BAP 1999) (it is the majority view that a parent's obligation to pay a child's college expenses pursuant to a divorce decree may constitute an obligation "in the nature of support" that is nondischargeable under Section 523(a)(5)); In re Christison, 201 B.R. 298 (Bkrtcy. M.D.Fla. 1996) (debtor's obligation to pay child's health insurance costs while in college nondischargeable as support).
Accordingly, the Court finds that Randal Voss' obligation to pay one-half of Darcie's uninsured medical expenses is an obligation in the nature of support to be accorded priority under Section 507(a)(7). Since Chapter 13 plans are confirmable only where they provide for full payment of all allowed priority claims, the Debtors' Plan in this case must provide for full payment of Randal's support obligation for uninsured medical expenses incurred for or on behalf of his children in the amount of $2,296.46. Because the Plan as filed does not so provide, confirmation will be denied. The Debtors should be given fourteen days in which to file an Amended Plan consistent with this Opinion or to convert or dismiss their case. A separate Order will be entered.
This Opinion constitutes this Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.
ORDER
For the reasons stated in an Opinion filed this date, IT IS HEREBY ORDERED that:
1. Confirmation of the Chapter 13 Plan is DENIED;
2. The Debtors shall, within fourteen days from the date of entry of this Order, file an Amended Plan consistent with the Opinion filed with this Order or a motion to either convert or dismiss Bankruptcy Case No. 01-80081; and
3. If an Amended Plan is not filed and the Debtors fail to file a motion to convert, their case shall be DISMISSED.