Becker Mckay Wyckoff, They?re Just Letting Anyone in These Days: the Expansion of § 523(a)(5)?s ?domestic Support Obligation? Exception to Discharge

• Publication year: 2011

THEY’RE JUST LETTING ANYONE IN THESE DAYS: THE EXPANSION OF § 523(A)(5)’S “DOMESTIC SUPPORT OBLIGATION” EXCEPTION TO DISCHARGE

INTRODUCTION

In the Western District of Oklahoma in 2010, a woman named Stephanie Tucker, a single widowed mother, suddenly became responsible for $15,405 in attorney’s fees incurred during litigation in which she had previously prevailed.1 Her deceased husband’s parents had sued her for custody of their

grandchild, and when Ms. Tucker successfully defended the suit, the court ordered the grandparents to pay her attorney’s fees.2 However, when the grandparents filed for bankruptcy, the court decided that these fees were dischargeable in part because they were owed to Ms. Tucker.3 Although Ms. Tucker had prevailed and retained custody in the earlier action, she was suddenly and inequitably burdened with over $15,000 in fees.

Meanwhile, in 2010, another award of almost $10,000 in attorney’s and other litigation-related fees were at issue in the Bankruptcy Court for the Middle District of Florida.4 Prior to the debtor’s bankruptcy, a Florida state court had ordered him to pay the fees and court costs incurred in their divorce proceedings directly to his ex-wife’s attorney.5 As opposed to the single widowed mother above, the debtor’s former wife in this instance was not suddenly confronted with overwhelming fees she needed to pay.6 Instead, the court ordered the ex-husband to pay the attorney all of these debts and did not allow them to be discharged.7

1. Tucker v. Oliver, 423 B.R. 378, 379 (W.D. Okla. 2010); Brief of Appellant at 8–9, Tucker v. Oliver, 423 B.R. 378 (W.D. Okla. 2010) (No. CIV-09-1137-HE), 2009 U.S. Dist. Ct. Briefs LEXIS 794 at *4–5.

2. Tucker, 423 B.R. at 379.

3. Id. at 379–81 (“To qualify [as a domestic support obligation], the debt must be owed to or recoverable by ‘a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible

   relative.’ The undisputed facts make it clear that Ms. Tucker, as the former daughter-in-law of the debtors, is none of these.” (citation omitted) (quoting 11 U.S.C. § 101(14A)(A) (2006)).

4. Coleman v. Blackwell (In re Blackwell), 432 B.R. 856, 857 (Bankr. M.D. Fla. 2010).

5. Id. at 859–60. The debtor owed the fees in question directly to the plaintiff as the attorney to the debtor’s ex-wife. Id. Additionally, the divorce court had previously ordered the debtor to pay the ex-wife’s attorney’s fees for the divorce, mortgage payments, and various late fees and interest accrued by her due to the

debtor’s contempt of court, none of which were at issue in this opinion. Id.

6 Id. at 862–63.

1. Id.

   In comparing these cases, the most startling observation is that both holdings rest on the same statutory provision—§ 523(a)(5)—and the exact same statutory language.8 This Bankruptcy Code (Code) section allows courts to declare debts deemed “domestic support obligations” nondischargeable in bankruptcy.9 How, though, could courts rely on the exact same language and reach opposite outcomes? This analysis is necessary as courts’ presently disparate applications of § 523(a)(5) must be remedied if the Code is to meet

   its goal of equitable enforcement. This Comment addresses and answers this question.

   
   

   Abiding by its general intent to respect and protect support for family members (especially those made vulnerable through divorce and bankruptcy proceedings), § 523(a)(5) excepts “domestic support obligations” from discharge in bankruptcy. Section 101(14A) provides the Code’s only definition of “domestic support obligation,” specifying four requirements a debt must

   satisfy to be nondischargeable as a domestic support obligation.10 One

   requirement is that the debt must be owed to, or recoverable by, the “spouse, former spouse, or child of the debtor.”11 And while its language may seem obvious and understandable, courts have struggled to clearly and consistently interpret this element since Congress codified the original familial support exception from discharge in 1978.12 The confusion even survived the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA or 2005 Amendments).13 Many would find attempting to define family to be a complicated and multifaceted task. Likewise, courts have found it particularly difficult to demarcate the practical scope of “spouse, former spouse, or child of the debtor.”14 As a result, courts’ enforcement of the exception for domestic support obligations is varied and inconsistent and, as

   
   

2. See Tucker, 423 B.R. at 381; In re Blackwell, 432 B.R. at 862–63. All “§” in this Comment refer to sections of title 11 unless otherwise indicated.

9 11 U.S.C. § 523(a)(5) (2006).

10 Id. § 101(14A).

1. Id. § 101(14A)(A). Courts have referred to this provision as the “payee requirement.” Kassicieh v. Battisti (In re Kassicieh), 425 B.R. 467, 473 (Bankr. S.D. Ohio 2010).

2. Even long before the 2005 Amendments, many scholars studied the issues courts were having

   interpreting 11 U.S.C. § 523(a)(5). See, e.g., Patricia A. Cullen, Note, Does Anybody Know the Rules in Federal Divorce Court?: A Case for Revision of Bankruptcy Code § 523, 46 RUTGERS L. REV. 427 (1993); Margaret M. Mahoney, Debts, Divorce, and Disarray in Bankruptcy, 73 UMKC L. REV. 83 (2004); Catherine

   E. Vance, Till Debt Do Us Part: Irreconcilable Differences in the Unhappy Union of Bankruptcy and Divorce, 45 BUFF. L. REV. 369 (1997).

3. See infra Part II.

4. See infra Parts I.B–II.

   demonstrated in the above examples, thwarts the efforts of courts to equitably and accurately apply the Code.

   
   

   The majority of courts previously read, and continues to read, the

   § 523(a)(5) payee language out of the statutory requirements.15 As a result, those courts have consistently held that the payee requirement is broader than the payees explicitly listed in § 101(14A), finding it to include debts to attorneys, banks, and other third parties. More recently, however, several

   courts have interpreted the payee language and the changes instituted by BAPCPA as plainly as possible, declaring that only debts owed directly to the listed payees could be nondischargeable.16 This approach, although a valid one, is a more literal application than Congress intended.17

   
   

   To temper the plain meaning analysis of the language so that it fits with the policy, purpose, and equities involved, courts should combine this “plain meaning” interpretation with the judicially created limited exception to it. Courts should embrace this approach as the method by which they analyze these domestic support obligations. The exception involves investigating the underlying responsibility for the debt and identifying which of the parties would ultimately be responsible for paying the obligation if the debt was discharged because it was not owed directly to one of the listed payees. This approach would be in accordance with the legislative history, the policy objectives, and the findings of many other approaches to statutory

   construction.18 It would also grant courts greater flexibility when dealing with

   individual cases involving domestic support obligations.

   
   

   Bankruptcy and family law intersect in § 523(a)(5) of the Code. Thus, discussions involving the interpretation of § 523(a)(5) must also include a family law perspective. Issues involving domestic support obligations arise most frequently in situations where either a debtor has been ordered to pay attorney’s fees after a divorce, third-party fees are incurred during divorce proceedings (for example, fees to guardians ad litem or child psychologists), or

   paternity is at issue.19 Because divorce and bankruptcy frequently occur

   
   

5. See infra Parts I.B, II.B.

6. See infra Part II.A.

7. See infra Part III.A.2, B.3.a.

8. See infra Part III.A.2–3, B.3.

9. 4 COLLIER ON BANKRUPTCY ¶ 523.11[4] (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2011); see also Miller v. Gentry (In re Miller), 55 F.3d 1487, 1489–90 (10th Cir. 1995) (finding fees due to guardian ad litem and child psychologist nondischargeable under § 523(a)(5)).

   concurrently,20 this is an issue that truly affects many individuals and which necessarily involves multiple courts—bankruptcy and various state courts. In fairness to the parties involved and in the interest of judicial consistency, courts should embrace and apply a uniform method of interpreting

   § 523(a)(5)’s payee language.

   
   

   This Comment offers a uniform approach to the interpretation of the domestic support obligation “payee requirement” by analyzing the various interpretive strategies courts have used both pre- and post-200521 and carefully considering the policy and the corresponding congressional intent of the amendments related to domestic support. Part I summarizes the history of

   divorce and separation debts and the Code sections that regulate them. Part I also chronicles bankruptcy court decisions prior to BAPCPA and discusses the courts’ conflicting interpretations of family support obligations. Part II discusses more current, post-BAPCPA decisions, particularly exploring the conflicts among the courts, and many courts’ continued reliance on their pre- BAPCPA interpretations of family support obligations. Part III explores the specific policy objectives behind the treatment of domestic support obligations and considers Congress’s intent in altering the domestic support obligation clause from its previous statutory form. Finally, Part III suggests a way to reconcile competing forces, including: the plain language of the statute, the Code sections’ legislative history, the overarching policy objectives, the family concerns and bankruptcy law equities, and the courts’ currently varied approaches. Ultimately, this Comment suggests a solution that provides courts with a process of deciding domestic support obligation cases more uniformly and comprehensively: the judicially developed exception to the plain meaning rule.

   
   

10. Bankruptcy Site: Statistics, THE PEOPLE’S SITE FOR INFORMATION ON THE NEW BANKRUPTCY LAW,

    http://www.bankruptcylawinformation.com/index.cfm?event=dspStats (last visited Mar. 1, 2011)...