Bankr. E.D.N.C.: In re Wood- Determination of whether Property Settlement Constitutes a Domestic Support Obligation under 11 U.S.C. § 1328(a)(2)

Summary: Property Agreement provided that the Debtor would be primarily liable for the mortgage debt and "[t]o the extent of any obligation contained herein is discharged in bankruptcy and the non-bankrupt party is held liable for said debt, the non-bankrupt party shall have the right to petition a court of competent jurisdiction for spousal support in an amount sufficient to cover any amounts so discharged."  The Debtor, of course, filed Chapter 13 and disputed whether this created a domestic support obligation under 11 U.S.C. § 1328(a)(2).

Citing to In re Deberry, 429 B.R. 532, 537 (Bankr. M.D.N.C. 2010), the court held that a debt is a domestic support obligation if it:

(1) owed to or recoverable by a former spouse;

(2) in the nature of alimony, maintenance, or support;

(3) established before the bankruptcy relief is filed by a separation agreement or divorce decree; and

(4) not assigned other than for purpose of collection.

 It is necessary to look "beyond any labels used by the parties and instead determine whether ‘at the time of its creation the parties intended the obligation to function as support or alimony.’" McCollum v. McCollum, 415 B.R. 625, 631 (Bankr. M.D. Ga. 2009).

In the property settelement in the present case both parties "forever [gave] up any right to spousal support (alimony) that they may have from the other" and no where in the agreement did it state that the Debtor’s obligations were in the nature of espousal support and was instead merely a contractual obligation. Going further, the court found that the property settlement was an invalid pre-petition waiver of discharge, since "the obligation on the debt was not intended as alimony at the time of the agreement, the court cannot change the parties’ intent to survive the discharge in bankruptcy." For a copy of the opinion: Wood- Determination of whether Property Settlement Constitutes a Domestic Support Obligation under 11 U.S.C. § 1328(a)(2).PDF