Deichert v. Deichert

Brief Fact Summary. Appellant filed bankruptcy and attempted to discharge several debts assigned to him in a previous divorce. The trial court found that several of the support debts were non-dischargeable.

Synopsis of Rule of Law. Debts created to perform a support function are non-dischargeable in bankruptcy.

Facts. Approximately 8 months after a final divorce decree, appellant Dr. Robert Deichert filed a voluntary petition for Chapter VII bankruptcy in the United States Bankruptcy Court describing himself as married but separated. Appellee Eleanor Deichert was not listed as a creditor in any required Schedule A statements concerning debtor liabilities. Appellant listed the marital residence and a station wagon as real and exempt assets respectively, although both had been granted to appellee pursuant to the divorce decree. The Bankruptcy Judge entered a Discharge of Debtor Order releasing appellant from all personal liability for debts existing on the date the bankruptcy case was instituted. Debts determined non-dischargeable were excluded. At a hearing on appellee’s enforcement petition appellant claimed his obligations had been discharged by the Bankruptcy Court. The court designated various marital obligations in the divorce decree and order as dischargeable or not in bankruptcy
and imposed a $1,000 per day fine for failure to comply with the nondischargeable obligations.

Issue. Did the court properly determine that some of appellant’s obligations under the divorce decree where non-dischargeable in bankruptcy?

Held. The court properly determined that appellant’s obligations were non-dischargeable.
Bankruptcy courts and state courts exercise concurrent jurisdiction over whether a marital obligation is dischargeable under the Bankruptcy Code. What constitutes alimony, maintenance, and support is determined according to federal bankruptcy law, but state law considerations must be employed in the analysis of determining dischargeability.

This creates two countervailing principles: 1) the bankruptcy court’s fundamental goal of providing a fresh start to the honest debtor; 2) and the congressional policy of giving first priority to the adequate financial maintenance of a debtor’s children and ex-spouse. The question is whether a debt was created to perform a support function, considering all relevant economic and noneconomic factors.

The label of an obligation as property division or equitable distribution will not prevent a finding that the debt is in the nature of alimony or support and consequently, not dischargeable. The court should look to the intent of the parties and/or divorce court and the effect/function of the obligation.

In this case the trial court correctly determined that the marital residence and station wagon where maintenance and support. The marital residence was shelter, a necessary aspect of support and the station wagon was necessary transportation. Both are non-dischargeable. As was the appellant’s court ordered payment of the mortgage on the marital home. The lien on appellant’s medical building was correctly determined to be non-dischargeable to ensure compliance with the obligation to provide alimony and property to appellee for support. The parties’ joint debts were non-dischargeable based upon the economic disparity between the parties, the employability and educational level, and the economic disadvantage to the creditor-spouse as a result of the marriage.

Discussion. The Court noted that appellant had abused the procedures of the courts in attempting to avoid such support debts through bankruptcy.