Even if a debtor has the ability to pay a property settlement debt for purposes of 11 U.S.C.S. § 523(a)(15)(A), the debtor may still obtain a discharge of the obligation if the debtor can prove, by a preponderance of the evidence, that discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse or child of the debtor. 11 U.S.C.S. § 523(a)(15)(B). Unlike § 523(a)(15)(A), there are no similar Bankruptcy Code provisions from which bankruptcy courts can seek guidance in applying this test. However, it is clear from the language of the statute that in determining whether a debt is nondischargeable under § 523(a)(15)(B), a court must compare the standard of living of the debtor against the standard(s) of living of his or her spouse, former spouse and/or children to determine whether the debtor will "suffer more" by not receiving a discharge of the debts in question than his or her spouse would suffer if the obligations were discharged.
The parties' divorce decree ordered the debtor (Victor Smither) to pay the creditor's attorney fees and to pay an amount to equalize the distribution of the marital estate. Subsequently, the creditor (Joan Smither - former spouse of debtor) brought an action under § 523(a)(5) and § 523(a)(15) in the debtor's Chapter 7 proceeding to obtain a non-dischargeability order concerning those divorce-related obligations.
Were the debts dischargeable?
In ruling that the debts were non-dischargeable, the court found that the debtor's obligation for the divorce court attorney fees met the four-part test of § 523(a)(5). The divorce court clearly intended the fee award to be in the nature of support, because it had the effect of providing actual necessary support to the creditor, and the fee award was not manifestly unreasonable. As for the equalization award, the court modified the divorce decree by ordering the debtor to repay that award in monthly installment payments, beginning after his repayment of the divorce-related attorney fees. The debtor did not meet his burden of proving that the award was dischargeable, which shifted to him after the creditor established that it was not a nondischargeable debt under § 523(a)(5) and that it arose pursuant to the parties' divorce.