Howard v. Howard
336 S.W.3d 433, 2011 WL 1620590, 2011 Ky. LEXIS 52 (2011)
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Rule of Law:
An obligation in a divorce decree for one spouse to pay a marital debt to a third-party creditor is considered a non-dischargeable debt "to a former spouse" under 11 U.S.C. § 523(a)(15) as amended by the BAPCPA. A state court may therefore enforce this obligation through its contempt powers even after the debtor spouse receives a Chapter 7 bankruptcy discharge.
Facts:
- Roy Shane Howard (Shane) and Sondra Howard were married and had one child together.
- During the marriage, both Shane and Sondra worked as guards at the same federal prison.
- The couple jointly incurred a debt to National City for a loan on their Dodge Durango.
- After the parties separated, Shane voluntarily quit his job at the federal prison.
- Before the divorce decree was entered, the Dodge Durango was repossessed by the lender.
- The final divorce decree stated that the parties had agreed Shane would be liable for the debt on the repossessed Durango.
- After the divorce was finalized, Shane filed for Chapter 7 bankruptcy.
- Following Shane's bankruptcy discharge, the creditor for the Durango loan began collection efforts against Sondra.
Procedural Posture:
- Roy Shane Howard and Sondra Howard were divorced by a decree issued by the Laurel Family Court, a Kentucky trial court.
- The trial court's decree found Shane to be voluntarily underemployed, set his child support based on imputed income, and ordered him to pay the marital debt on a repossessed vehicle.
- Shane later filed a motion in the same trial court to reduce his child support obligation.
- Sondra filed motions to hold Shane in contempt for failure to pay the vehicle debt and for an award of attorney's fees.
- After a hearing, the trial court denied Shane's motion to modify child support, found him in contempt, and ordered him to pay $500 of Sondra's attorney's fees.
- Shane, as appellant, appealed the trial court's rulings to the Kentucky Court of Appeals, with Sondra as the appellee.
- The Court of Appeals affirmed the trial court's judgment on all issues.
- The Supreme Court of Kentucky then granted discretionary review of the case.
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Issue:
Does a former spouse's obligation under a divorce decree to make payments to a third-party creditor on a marital debt survive a Chapter 7 bankruptcy discharge as a non-dischargeable debt under 11 U.S.C. § 523(a)(15), allowing a state court to enforce it through contempt proceedings?
Opinions:
Majority - Chief Justice Minton
Yes. A former spouse's obligation under a divorce decree to pay a marital debt to a third-party creditor is a non-dischargeable debt 'to a spouse' under 11 U.S.C. § 523(a)(15) as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). State courts have concurrent jurisdiction to interpret a bankruptcy discharge and can enforce such an obligation through contempt. Prior to BAPCPA, a non-debtor spouse had to file an adversary proceeding in bankruptcy court to prevent such a debt from being discharged. BAPCPA amended 11 U.S.C. § 523(c)(1) to remove this requirement, making these debts automatically non-dischargeable in Chapter 7. The bankruptcy code's broad definition of 'debt' and 'claim' means that an obligation to pay a third party on behalf of a former spouse constitutes a 'debt to a former spouse,' even without an explicit 'hold harmless' clause. The court also affirmed the denial of the child support modification, finding Shane failed to show a material and continuing change of circumstances post-decree that would overcome the initial finding of voluntary underemployment.
Concurring-in-part-and-dissenting-in-part - Justice Scott
This opinion concurs with the majority's holding on the bankruptcy issue but dissents from its affirmance of the denial to modify child support. The trial court abused its discretion by automatically continuing the 'voluntary underemployment' finding without properly considering Shane's evidence of his consistent work history and efforts at economic betterment over the two years since the divorce. The majority's approval creates a standard where a person once found to be voluntarily underemployed may never escape that designation unless they return to their previous, higher income level. A family court must conduct a renewed analysis of whether a party remains voluntarily underemployed when presented with a motion to modify and sufficient evidence of changed circumstances, which Shane provided.
Analysis:
This decision clarifies the significant impact of the 2005 BAPCPA amendments on domestic relations law, establishing that property settlement debts in a divorce—even those payable to third parties—are automatically non-dischargeable in Chapter 7 bankruptcy. This removes a significant procedural hurdle for the non-debtor spouse and strengthens their protection against being pursued by joint creditors post-divorce. The case solidifies the principle that a state court's contempt power remains a potent tool for enforcing divorce decrees, effectively treating the obligation to pay a third party as a separate, non-dischargeable duty owed directly to the ex-spouse.
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