Cite as: [Unpublished]
Bowman (f/k/a Mary Strack), Plaintiff, v.
Jeffrey J. Strack, Defendant
(In re Jeffrey J. Strack, Debtor)
Bankruptcy Case No. 92-13420-7, Adv. Case. No. A94-1089-7
United States Bankruptcy Court
W.D. Wisconsin, Eau Claire Division
November 8, 1994
Cathy J. Gorst, for the plaintiff.
Joan D. Eloranta, for the defendant.
Thomas S. Utschig, United States Bankruptcy Judge.
MEMORANDUM OPINION, FINDINGS OF FACT,
AND CONCLUSIONS OF LAW
Although the Bankruptcy Code is intended to provide debtors with a "fresh
start," a fundamental concept in bankruptcy law is that not all debts may be
discharged. In this regard, 11 U.S.C. § 523(a)(5) provides that a debt is not discharged
to the extent that it is
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--
. . .
(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.
At issue in the present case is whether the debtor's obligation to indemnify his former
wife from liability on certain debts may be discharged in bankruptcy. Having previously
discharged his direct liability to the creditors in question on these debts, the debtor,
Jeffrey J. Strack, now seeks to discharge this indemnification obligation as well. His
former wife, Mary Bowman, contends that the obligation is one in the nature of support and
is not dischargeable in bankruptcy. A trial was held on the matter on October 19, 1994.
The debtor was represented by Joan D. Eloranta; the plaintiff was represented by Cathy J.
The facts are as follows. The parties were married in September of 1977 and divorced in
March of 1992. At the time of the divorce, the plaintiff was 33 years old. The decree
contained a finding that she was a disabled housewife. Her gross monthly income was
$698.00, consisting solely of the debtor's support payments and food stamps. The debtor at
the time of the divorce was 36 years old and employed as a car salesman. His gross monthly
income was $3,078.00.
Incident to their divorce, the parties entered into a marital settlement agreement
which was approved by the state court and made a part of the divorce decree. The parties
agreed that the plaintiff would receive custody of the couple's three minor children. The
debtor was obligated to pay approximately $520.00 per month in child support and
approximately $170.00 per month in spousal support. Additionally, the debtor was to
provide health insurance for the minor children. The settlement agreement divided what
little marital property existed between the parties. In a separate section entitled
"debts and financial obligations," the agreement also assigned certain debts to
each party and required that party to indemnify and hold the other harmless from such
While the settlement agreement is unclear as to the exact amount of the debts assigned
to the debtor, the statements of the case submitted for trial indicate that the plaintiff
was assigned debts in the amount of $7,921.46, while the debtor was assigned debts in the
amount of approximately $32,000.00. Of the debts assigned to the debtor, $6,500.00 was a
debt to Antoinette Steckel, the plaintiff's mother, and approximately $4,400.00 was an
obligation to the Chiropractic Arts Clinic, the chiropractic clinic at which the
plaintiff's present husband is employed. The remaining debts included the mortgage loan on
the marital residence, credit card debts, and other similar debts.
The $6,500.00 obligation to the plaintiff's mother apparently comprised one-half of a
loan made to the parties for home improvements. The plaintiff was to be responsible for
the other one-half of the debt. The chiropractic bills apparently arose in the course of
treatment of the plaintiff's disability. At trial, the plaintiff testified that she became
disabled as a result of injuries she sustained during an altercation with the debtor. At
the time of the divorce, she had initiated a personal injury action against the debtor,
which she testified she dismissed because he agreed to assume the medical debts related to
Several events occurred almost immediately after the entry of the divorce decree. In
May of 1992, the three minor children began residing with the debtor, rather than the
plaintiff. This arrangement was approved on a temporary basis by the state court until it
finally awarded permanent custody of the children to the debtor in September of 1994.
Further, the plaintiff remarried in September of 1992. Thus, the debtor's obligation to
make both child support and maintenance payments directly to the plaintiff terminated
within six months of the divorce.
The debtor testified that after the divorce he attempted to make payment arrangements
with his various creditors. He claims that the only creditors who refused his payment
proposals were Antoinette Steckel and the Chiropractic Arts Clinic. As a result of his
inability to resolve matters with all of his creditors, he filed bankruptcy. However,
testimony at trial also indicated that he made few, if any, payments on the assigned debts
before filing bankruptcy. Further, prior to filing bankruptcy, and in accordance with the
divorce decree, the marital residence and a camper owned by the parties were sold by the
secured creditors and the proceeds were applied to the underlying debts. It would appear
that these were the only real "payments" made by the debtor to any of the
creditors in question. After the debtor discharged his personal liability on all of these
debts, he petitioned to reopen the case so as to discharge his obligation to indemnify his
former wife as well.
Disputes about the dischargeability of obligations created by a divorce decree are
among the most frequently litigated, and hotly contested, matters in bankruptcy. Under §
523(a)(5), if an obligation is "actually in the nature of" alimony, maintenance
or support, it is not dischargeable in bankruptcy; however, an obligation intended as
"property division" may be discharged. In re Maitlen, 658 F.2d 466 (7th
Cir. 1981). Unfortunately, given that many obligations, such as those before the Court in
this matter, do not easily fit within traditional notions of either support or property
division, the resulting struggle is often akin to forcing the proverbial square peg into a
Nonetheless, the issue of what constitutes a nondischargeable debt for alimony,
support, or maintenance under 11 U.S.C. § 523(a)(5) is one of federal law, not state law.
In re Hoivik, 79 B.R. 401 (Bankr. W.D. Wis. 1987). The burden of proof is on the
party objecting to the discharge of the obligation, and the standard of proof is by a
preponderance of the evidence. In re Messnick, 104 B.R. 89 (Bankr. E.D. Wis. 1989).
Further, the exceptions to discharge contained in § 523 must be strictly construed in
favor of the debtor. Id. at 92. The fact that the parties or the state court may
have labelled the obligation as "support" is not determinative of the issue of
dischargeability, although state laws regarding the divorce and the parties' marital
obligations may be of assistance. Messnick. 104 B.R. at 92. The essential goal of
the bankruptcy court's inquiry is to determine whether the obligation was intended as
property division or support and whether the obligation actually achieved the intended
Where the nature of the obligation is unclear, the court must determine whether the
obligation is intended to balance the income of the parties or preserve equity in
property. Hoivik, 79 B.R. at 404. If necessary, the bankruptcy court may look
beyond the documents and focus upon the circumstances of the parties at the time of the
divorce. Messnick, 104 B.R. at 92; Hoivik, 79 B.R. at 402. The factors which
have been identified as important in determining whether an obligation is in the nature of
support or property division are as follows:
a. whether a maintenance award is also made for a spouse;
b. whether there was a need for support at the time of divorce and whether support
would be inadequate absent the obligation in question;
c. whether the court intended to provide for support by the obligation in question;
d. whether the debtor's obligation terminated upon the death or remarriage of the
e. whether the amount or duration of payments may be altered upon a change in
f. the age, health, educational level, work skills, earning capacity and other
financial resources of the parties independent of the obligation in question;
g. whether payments are extended over time or are in a lump sum;
h. whether the debt is characterized as property division or support under state law;
i. whether the obligation balances the disparate incomes of the parties;
j. the tax treatment of the payments;
k. whether one party relinquished a right to support under state law in exchange for
the obligation in question;
Messnick, 104 B.R. at 92-93.
The present needs of the recipient spouse are usually irrelevant to the
dischargeability determination. Messnick, 104 B.R. at 92. However, the debtor in
this case argues that because he now has custody of the children, the plaintiff has
remarried, and it would be a financial burden upon both him and the children to pay these
debts, the obligation to indemnify his wife should be dischargeable. In support of this
contention, the debtor cites the cases of In re Calhoun, 715 F.2d 1103 (6th Cir.
1983) and In re White, 55 B.R. 878 (Bankr. E.D. Tenn. 1985).
In Calhoun, the Sixth Circuit held that determining that the parties and the
state court intended the assumption of a debt as a support obligation is only the
beginning of the inquiry. According to the court,
[The] finding of intent does not, however, control the ultimate issue
of whether the assumption of joint debts was actually in the nature of support for
purposes of federal bankruptcy. If the bankruptcy court finds, as a threshold matter, that
assumption of debts was intended as support it must next inquire whether such assumption
has the effect of providing the support necessary to ensure that the daily
needs of the former spouse and any children of the marriage are satisfied. 715 F.2d at
1109. [Emphasis in original].
If, without the debt assumption the spouse could not obtain daily
necessities, such as food, housing and transportation, the effect of debt assumption may
be found "in the nature of support" for bankruptcy purposes. Id. Even if
the assumption does provide necessary support, however, under Calhoun the
bankruptcy court must still determine if the amount of support represented by the
assumption is so excessive as to be "manifestly unreasonable" under traditional
concepts of support; if unreasonable, the bankruptcy court is to set a reasonable limit
upon the nondischargeability of the obligation for purposes of bankruptcy. Id. at
1110. This analysis was adopted by the court in In re White, the other case cited
by the debtor.
As is correctly stated by the plaintiff, however, the Calhoun decision has come
under considerable criticism in the years since its rendition. Every Court of Appeals to
address the issue has rejected the Calhoun court's three-part test and held that
the bankruptcy court is to look only at the circumstances of the parties at the time of
the divorce, not their present needs. See, e.g., In re Harrell, 754 F.2d 902
(11th Cir. 1985); Draper v. Draper, 790 F.2d 52 (8th Cir. 1986); Forsdick v.
Turgeon, 812 F.2d 801 (2nd Cir. 1987); Sylvester v. Sylvester, 865 F.2d 1164
(10th Cir. 1989); In re Gianakas, 917 F.2d 759 (3rd Cir. 1990).
This overwhelming rejection of Calhoun is based upon several factors. First, the
language of § 523(a)(5) would appear to require courts to determine nothing more than
whether the obligation at issue is "actually in the nature of alimony, maintenance,
or support." See 11 U.S.C. § 523(a)(5)(B). According to the court in Harrell,
supra, the statutory language suggests a "simple inquiry" as to whether
the obligation can legitimately be characterized as support; the language does not justify
an ongoing assessment of the parties' financial needs as circumstances change. Harrell,
754 F.2d at 906.(2)
Another consideration is that of comity. An inquiry into the present conditions of the
parties would arguably put federal courts into the position of modifying the matrimonial
decrees of state courts, thus interfering with "delicate state systems for dealing
with the dissolution of marriages and the difficult and complex results that flow
therefrom." Forsdick, 812 F.2d at 803-04. In the absence of a clear mandate
from Congress, it would appear that there is no basis for overturning or modifying the
award previously found appropriate by the state court. Id. at 804; Harrell,
754 F.2d at 907; Sylvester, 865 F.2d at 1166. Further, where appropriate and
authorized by state law, a debtor may resort to state court to request modifications in a
divorce settlement on the basis of changed circumstances. Thus, the inquiry for the
bankruptcy courts should be limited to the nature of the obligation at the time it was
undertaken. Gianakas, 917 F.2d at 763.
Indeed, even the Sixth Circuit has narrowed the scope of Calhoun. In In re
Fitzgerald, 9 F.3d 517 (6th Cir. 1993), the Sixth Circuit recognized the widespread
criticism of Calhoun, including the criticism that it required undue federal
involvement in state domestic authority and penalized the non-debtor spouse for becoming
self-sufficient. Id. at 520-21. The Fitzgerald court, in an opinion written
by the author of Calhoun, stated that Calhoun was not intended to intrude
into the state's traditional authority or punish the non-debtor spouse or children.
Although it did not clearly overturn Calhoun, the court expressly limited its
holding to those cases where the obligation was clearly not designated as alimony or
maintenance. Id. at 521.
Nonetheless, given the considerations outlined above, this Court declines to follow Calhoun
even where the obligation is not clearly designated as alimony or maintenance. Without a
directive from Congress, an examination of the present needs of the parties is an
inappropriate invasion of state authority.(3) The
condition and intention of the parties at the time of the divorce are the relevant issues,
and subsequent changes in those conditions or intentions cannot alter the determination. Messnick,
104 B.R. at 92.
Applying the Messnick factors to this case, it is clear that at least some of
the debts were intended as support. While it is true that the decree contained separate
provisions for maintenance of both the plaintiff and the minor children, there was clearly
a need for additional support. The plaintiff was disabled and received no income beyond
support payments and food stamps. At least in part, the obligation to assume various
marital debts balanced the disparate incomes of the parties, thus constituting an
obligation in the "nature" of support. Hoivik, 79 B.R. at 404. Further,
although the exact amount of any waiver of support was disputed, it appears that the
plaintiff at least believed she was surrendering the right to a portion of the support
specified by law so as to permit the debtor to make the payments in question. Finally, the
debtor himself testified that he assumed the debts because, among other things, the
plaintiff had no money to pay them.
However, given that there is no indication that the assumption of all of the debts was
intended as support, it is possible that some of the debts were assumed for different
reasons. Accordingly, the Court must examine each debt assumed by the debtor to determine
whether it was assumed to support the plaintiff or the children. At the time of the
divorce, the plaintiff had sued the debtor for an intentional tort. As part of the divorce
settlement, the plaintiff agreed to dismiss this action if the debtor would assume the
medical bills associated with her injury. The debtor agreed to assume the medical bills to
the Chiropractic Arts Clinic to avoid the expense and aggravation of this lawsuit, not
because the parties intended it as support. As the assumption was not intended as support,
the obligation to indemnify the plaintiff as to this debt is dischargeable.
Additionally, the debt to Antoinette Steckel was not intended as support. The parties
were jointly liable on the mortgage debt on their residence. The debtor was already
assuming sole responsibility for the deficiency in the mortgage debt. The loan in question
was for home improvements and the assumption by the debtor of this debt was intended to
balance the equities associated with the disposition of the marital residence rather than
support the plaintiff or balance their respective incomes. Thus, the obligation to
indemnify plaintiff as to this debt may be discharged as well.
Accordingly, the debtor is discharged from his obligations to indemnify and hold the
plaintiff harmless from any and all debts to Chiropractic Arts Clinic or Antoinette
Steckel. The remaining debts referenced in the marital settlement agreement are marital
debts and the assumption of these debts was clearly intended as support; the obligation to
indemnify plaintiff and hold her harmless as to these debts is accordingly not
dischargeable in the debtor's bankruptcy.
This decision shall constitute findings of fact and conclusions of law pursuant to
Bankruptcy Rule 7052 and Rule 52 of the Federal Rules of Civil Procedure.
1. On several occasions, the plaintiff has mentioned that if she had
prevailed on the lawsuit, the resulting judgment would have been nondischargeable. This
statement not only presumes numerous facts not in evidence regarding her injuries, but
also is irrelevant as to whether the debts were assumed by the debtor as a support
2. Further support for this position is found in the fact that there
is no language in § 523(a)(5) which directs the court to consider the present status of
the parties. Arguably, had Congress wished the bankruptcy courts to consider the current
impact of its decision on the parties in determining whether an alimony or support debt is
dischargeable, it could have easily done so. It is clear that Congress was aware of such
considerations, as it provided that student loans are excepted from discharge unless
exception from discharge imposes an "undue hardship" upon the debtor or the
dependents of the debtor. See 11 U.S.C. § 538(a)(8). This indicates that the
exception in § 523(a)(5) can only be interpreted as an absolute exception to discharge. Forsdick,
812 F.2d at 804.
3. It would appear that Congress may have at least partially
addressed the issue in the recently passed Bankruptcy Reform Act of 1994. Section 304 of
that act amends 11 U.S.C. § 523 to create an additional exception to discharge for debts
(other than those described in § 523(a)(5)) incurred in connection with a divorce. This
new exception contains language which would seem to permit such debts to be discharged
where the debtor has insufficient assets for support of the debtor and any dependents.