If the debtor has assumed an obligation of the debtor's spouse to a third party in connection with a separation agreement, property settlement agreement, or divorce proceeding, such debt is dischargeable to the extent that payment of the debt by the debtor is not actually in the nature of alimony, maintenance, or support of debtor's spouse, former spouse, or child.
Appellee and his former wife entered into a settlement agreement in their divorce proceeding in which appellee agreed to pay his wife's counsel fees in monthly installments. Appellee then filed a bankruptcy petition and listed his obligation to his wife as an unsecured claim. The bankruptcy court ruled and the district court agreed that the debt for legal services rendered to appellee's former spouse in connection with the divorce proceeding was dischargeable.
Were the counsel fees dischargeable?
On appeal, the issue was whether the debt for legal services fell within the Bankruptcy Act, 11 U.S.C.S. § 523(a)(5). The court held that 11 U.S.C.S. § 523(a)(5) provided that a discharge in bankruptcy did not discharge a debtor from debts for alimony, maintenance, or support of a former spouse in connection with a divorce decree. Accordingly, the court concluded that appellee's debt for his former wife's legal services was nondischargeable in bankruptcy.