UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

11 U.S.C. § 523(a)(5)

        "What constitutes alimony, maintenance or support will be determined under bankruptcy laws, not State law." (HR Rep. No. 95-595, 95th Cong., 1st Sess. 364 (1977)). The factors to be utilized in determining whether a particular obligation constitutes maintenance or support have been noted by the BAP in In re Combs, 101 B.R. 609, 616 (9th Cir. BAP 1989):

1. The label given to the payments;
2. The context or location of the disputed provision in the decree;
3. The parties' negotiations and understanding of the provision;
4. Whether a lump sum or periodic monthly payments were provided for;
5. The relative earning power of the parties;
6. Whether the recipient spouse would be entitled to alimony under state law;
7. Whether interest accrues on the entire debt or only on the monthly payments past due; and
8. Whether the debtor's obligation of payment terminates on the death or remarriage of the recipient, or on the death of the debtor.

MR. GALLIEN: Correct.

THE COURT: Without interest; is that correct?

(Indiscernible).

MS. GALLIEN: That's correct.

      4 ABR 194  Transcript of Proceedings of January 24, 1992, In re James R. Gallien and Linette C. Gallien, case no. 3AN-91-10190 CIV, p. 5, lines 12-18.

        The disputed portion of the agreement is not in the decree. In the agreement, it appears next to three provisions amending the amount of child support. Goodrich understood that the purpose of the $30,000 payment provision was to provide for her support while she developed her dog grooming business. Gallien understood the payments to be strictly property settlement. There was no lump sum provision and the payments were to be $500 monthly with no interest.

        The initial petition for dissolution of marriage contained a form provision for spousal maintenance at paragraph VII. None of the blanks in paragraph VII of the form were completed. The amendment to the petition executed on January 23, 1992 did not refer to paragraph VII.

        Gallien had greater earning power than Goodrich at the time of the divorce. He had earned $27,000 in 1991 and about $38,000 in 1992. Goodrich earned nothing in 1991. Due to her status as a full-time mother, she had not worked outside the home for some time when the decree was entered. Early in the marriage Goodrich had earned as much as $11 an hour as a veterinary assistant.

        Despite her status as a mother and homemaker, Goodrich would not have been entitled to alimony or maintenance at the time of her divorce. Alaska law is very clear that maintenance to a spouse is only appropriate when the party seeking maintenance lacks sufficient property to provide for his or her reasonable needs and is unable to support themselves through employment. Messina v. Messina, 583 P.2d 804 (Alaska 1978). While Goodrich had no net business income at the time of the divorce, and was needed at home with her three children, she had property to provide for her needs. According to the petition for dissolution, she owned four one-acre lots with a value of $25,000 at the time of the divorce decree. These lots provided her with a means of support during the opening of her business. She was not entitled to maintenance at state law. Additionally, the obligation did not terminate on the death or the       4 ABR 195  remarriage of Goodrich or Gallien.

        Having considered all the Combs factors, I conclude that the obligation was not intended as maintenance or support for Goodrich or her children. The child support was specifically detailed in the agreement. The payment was for property the husband was to receive and was not based upon the financial need of the wife for support, due to her retention of real property having a value of $25,000 and the start-up of her grooming business. The obligation is not excepted from discharge under 11 U.S.C. § 523(a)(5).

11 U.S.C. § 523(a)(15)         Enacted as part of the Bankruptcy Reform Act of 1994, 11 U.S.C. § 523(a)(15) provides an exception to discharge for debts:

(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, a determination made in accordance with State or territorial law by a governmental unit 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 and, if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or

(B)    discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor;

        This vaguely worded statute has not been warmly received by a number of bankruptcy courts. In In re Butler, 186 B.R. 371, 372 (Bankr. D.Vt. 1995), Judge Francis Conrad stated:


        It has been said that one should never watch laws or sausage being made, and section 523(a)(15) of the Bankruptcy Code is no exception to that caution. . . . Using it is equivalent to applying acupuncture without a license because it does not heal the emotional wounds from a divorce. Indeed, section (a)(15) is an intrusive invasion into the private life of a former couple who had agreed in their divorce to separate forever.


Missouri Judge Frank Koger concurs:


      4 ABR 196  The problem with that section is that it requires bankruptcy courts to revisit, in excruciating detail, the anger, the bitterness, and the pain which the Debtor and the Debtor's former spouse have felt and now feel. In the instant case, one could almost see the old wounds being reopened and more expensive scars being inflicted upon both parties.


In re Silvers, 1995 WL 590208, *1, ___ B.R. ___ (Bankr. W.D. Mo.).

        Due to the vagaries of the statute, bankruptcy courts have been split on the issue of burden of proof. The majority of courts considering the issue have adopted a shifting burden of proof or persuasion once the plaintiff establishes a marital debt not in the nature of support. In re Becker, 185 B.R. 567, 569 (Bankr. W.D. Mo. 1995)(shifting burden of proof); In re Hill, 184 B.R. 750, 754 (Bankr. N.D. Ill. 1995)(shifting burden of proof); In re Carroll, 187 B.R. 197, 200 (Bankr. S.D. Ohio 1995)(shifting burden of proof); In re Silvers, 1995 WL 590208, *1, ___ B.R. ___ (Bankr. W.D. Mo.)(shifting burden of persuasion); and In re Florio, 1995 WL 602871, *1, ___ B.R. ___ (Bankr. W.D. Mo.)(shifting burden of going forward by preponderance of evidence). Two other courts have placed the burden of proof on the plaintiff. In re Woodworth, 187 B.R. 174, 176 (Bankr. N.D. Ohio 1995); In re Butler, 186 B.R. at 375.

        I concur with the majority view. Once the plaintiff establishes a marital debt not in the nature of support, the burden of proof shifts to the debtor. The debtor must prove, by a preponderance of the evidence, either an inability to pay under section (a)(15)(A) or a benefit greater than the detrimental consequences to his former spouse under section (a)(15)(B).

        As in Hill, I will focus application of the test under (A) to the time of the filing of the complaint. Section (a)(15)(A) mirrors the language of § 1325(b)(2). The ability to pay test concentrates on the reasonableness of the debtor's expenses. Like other courts, I am reluctant to impose my views on the debtor's lifestyle, in the absence of spending upon luxury goods and services. As noted in 5 Collier on Bankruptcy, ¶ 1325.08 at 1325-70-71 (15th ed. 1995):

        Hence, a court determining the debtor's disposable income is not expected to, and       4 ABR 197  should not, mandate drastic changes in the debtor's lifestyle to fit some preconceived norm for chapter 13 debtors. The debtor's expenses should be scrutinized only for luxuries which are not enjoyed by an average American family. For example, since it is not unusual for families in some areas to send their children to parochial schools, a court should not deem that a luxury. However, sending a child to a private boarding school is much less common, and could be deemed a luxury if no special necessity were shown. Similarly, it is not unusual for a family to have two automobiles. But there is no necessity that those automobiles both be in the latest models or that they be in the luxury class. Religious contributions or tithes, in amounts reasonably consistent with the debtor 's income are also expenses which should be allowed as part of a family's budget . . . .

. . . .

        In short, the court cannot and should not order debtors to alter their lifestyles where there is no obvious indulgence in luxuries, even where one or more unsecured creditors demand such a change. To engage in such close judgments and supervision would be to contravene the intent of Congress. It would also place impossible burdens on the court in determining the absolute necessity of every expense in each debtor's budget. Since the views of judges on such value-laden issues differ significantly, such an interpretation of the amendments would contravene their purpose of restoring nationwide uniformity to chapter 13.(footnotes omitted)

        Here it appears that the Galliens have had an opportunity to spend money on luxury goods and services. Their adjusted gross income for 1992 was $64,246. In 1993 and 1994 their adjusted gross was about $85,000. In 1995, the couple has grossed about $50,000 through September 8th. These figures are deceiving however. Following payment of taxes, child support and union dues, the Galliens had a cash flow of about $3,500 a month in 1992. In 1993, their net cash flow increased to about $5,000 a month. In 1994 they had net cash flow of about $4,000 a month, after deducting Tara Gallien's one time annuity withdrawal of $9,633. These funds went to pay closing costs and renovation expenses on their HUD home. In 1995, the couple has averaged about $3,800 a month in cash flow and $4,210 in expenses. Included in that cash flow is another $3,766 withdrawn from retirement funds by Tara Gallien.
        The Galliens spend their income virtually as soon as it is       4 ABR 198  received. Tara Gallien manages the family's finances. She incurs monthly deficits, despite the family's substantial cash flow. Her final withdrawal from the state simply went to pay bills.

        The future looks worse. Gallien's pay is now fixed at just over $1,000 a week with no overtime. Tara Gallien has withdrawn all her retirement funds from the state and has no resources other than part-time work. Given the taxes, child support, and union dues Gallien must pay, their deficits are likely to continue until Tara Gallien can send their children to school and resume full-time employment herself. That will not occur for several years.

        I've examined Tara Gallien's spending records for 1995. While she is not a superb money manager, she spent little or nothing on what could be considered luxury goods or services. Even if there was some fat in her spending, Nordstrom or Eddie Bauer purchases for example, it doesn't amount to more than two or three hundred dollars a month, at most. Given their $400 a month deficit at present, the Galliens simply don't have the ability to make the $500 a month payments to Goodrich. Moreover, Gallien's child support will continue to increase each year, regardless of his income. This further decreases his ability to pay.

        The Gallien household does not spend money on luxuries. Their vehicles are not luxury automobiles. Two vehicles are mandatory given Gallien's ever-changing workplace, their residence in Eagle River and their young family. They have no pleasure boats, snowmobiles, ATVs or recreational vehicles, standard fare for most Alaskans. Their home is modest with a reasonable payment of just under $1,000 a month. Nothing in the evidence indicated abuse or overuse of day care facilities by Tara Gallien. While James Gallien frequently returned home over the weekend by air to visit his family, I don't regard his returns to Anchorage from Valdez as luxuries. Moreover, he didn't participate in week-long R&R sessions because of his financial condition. Gallien has a family that needs his presence. Under these circumstances, travel to and from a job site is a necessity, not a luxury. Nor do I find Tara Gallien's spending on groceries, restaurants, snacks, or gifts luxurious. James Gallien's hunting and fishing trips were very       4 ABR 199  modestly priced and provided food for his family. There are simply no obvious indulgences by the Galliens. They can't afford it.

        The debtor does retain a fund of $10,300 in the Alaska electrical worker's money purchase pension plan. Under the terms of the plan, termination benefits will be paid if a member has been unemployed for six months. Additionally, if a member is unemployed for 45 days, he may request a lump sum payment on financial hardship grounds. I find that the benefits are reasonably necessary for the support of the debtor and his six dependents. The debtor works for electrical contractors of differing projects. In between projects he may be unemployed for substantial periods of time. Construction spending may decrease and there may be fewer jobs. His only access to the funds arises out of need through long-term unemployment or financial hardship. Under either scenario, the funds are reasonably necessary to support the debtor and his dependents.

        I therefore conclude that James Gallien does not have the ability to pay his obligation to Goodrich from income or property not necessary for the support of himself and his dependents.

        Because the tests of § 523(a)(15) are in the disjunctive, no further analysis is required. Gallien is entitled to a discharge of his obligation to Goodrich.

Conclusion

        The property settlement obligation of the defendant, James Gallien, to the plaintiff, Linette Goodrich, in the sum of $29,700 will not be excepted from discharge under 11 U.S.C. §§ 523(a)(5) or (a)(15)(A). A separate order and judgment will be entered dismissing the complaint with prejudice, with each party paying their own costs and attorney's fees.




DATED: November 16, 1995.

BY THE COURT
Donald MacDonald IV
UNITED STATES BANKRUPTCY JUDGE

1.       4 ABR 192  The lot had been a gift from Goodrich's parents. They received $7,000.00 cash, the permit, boat, and motor. The couple spent the cash prior to their divorce.