In re: Nelson, No. 10-40718-elp13 (Bankr. D. Oreg., April 22, 2011).
When can payments due an ex-spouse according to a dissolution judgment get priority under the Bankruptcy Code? A recent decision out of Oregon attempted to answer this question.
In the case, the ex-wife of the debtor objected to his Chapter 13 bankruptcy plan. She claimed that the plan did not provide for full payment of an obligation under their divorce and dissolution judgment. Since the ex-wife claimed that the obligation was a Domestic Support Obligation under section 507 of the bankruptcy code, it qualified for priority, and required full payment under the course of the plan.
According to the dissolution judgment at issue, the debtor was to pay the debt on the home they had lived in while they were married, and not to come after his ex-wife for the debt.
When the debtor filed his petition for bankruptcy, he claimed the obligation was a general unsecured claim, not a priority claim for domestic support as his ex-wife claimed. The court held that the payment was not one for domestic support, reasoning that the debtors had a short term marriage unlikely to receive an award for support. Although the dissolution judgment provided that the paying of such debt would be treated as support for bankruptcy purposes, the court held that there was no evidence that the provision was intended to actually be considered support.
While this is a relatively close call, the court emphasized the intent of the parties and the factual circumstances of the case, over the express words of the document. This might have been corrected if the wording of the judgment had been more clear, or the parties had possessed better representation at the time of the divorce decree. Decisions like this one are very fact-dependant, and require careful planning and representation in bankruptcy court.
