Ms. Calloway divorced Mr. Bowles and shortly before a final judgment was entered in their equitable distribution proceeding, she filed Chapter 13. Just prior to Ms. Calloway’s bankruptcy filing, the state court judge circulated a preliminary ruling to the parties via email, stating that he believed an unequal distribution of the marital assets in favor of Mr. Bowles would be equitable and that Ms. Calloway would be required was to pay a total of $50,514 by means of monthly payments of $300, due to the her liquidation of two retirement accounts, which had a total value of roughly $31,000. Additionally, since their separation, Ms. Calloway alone made all payments on the former marital home, with the mortgage against which being reduced by approximately $23,000.
Ms. Calloway’s Chapter 13 plan was proposed for 36 month with priority claims to be paid in full and an estimated 0% dividend to general unsecured creditors, with Mr. Bowles as the only listed such creditor. He, unsurprisingly, objected to confirmation of her plan asserting that the $50,514.52 owed to him was a priority claim as a domestic support obligation pursuant to §507(a)(1)(A) and that Ms. Calloway’s plan must provide for its full payment over the life of the plan pursuant to §1322(a)(2). The court found that Ms. Calloway’s plan appropriately provided for payment in full of priority claims, which, unless and until an objection determined otherwise, included Mr. Bowles claim as filed.
Mr. Bowles additionally objected on good faith grounds to confirmation, asserting that Ms. Calloway filed the case in bad faith to avoid repayment of his debt. The bankruptcy court rejected this characterization both because Ms. Calloway had steadfastly paid the mortgage against the jointly owned real property, without seeking to overstate her interest, and had no other means to repay the $50,514.52 on her fixed income other than over the course of a Chapter 13 plan.
While $1,111/mo. payment would satisfy Mr. Bowles’ priority claim in full in 60 months, this does look an awful lot like a property settlement and not a domestic support obligation, so there may be an objection to claim pending questioning its priority status. If successful, the $1,111 a month plan would, in the 36 month Applicable Commitment Period required here, only pay a dividend of approximately 50% to Mr. Bowles (or even less if there was an substantial and unanticipated change in circumstance sufficient to justify a modification later.)
For a copy of the opinion, please see: