The Bankruptcy Reform Act of 1978 prohibits the discharge of a debtor's obligation to make alimony, maintenance, or support payments to his or her former spouse. 11 U.S.C.S. § 523(a)(5). Whether a particular debt is a support obligation or part of a property settlement is a question of federal bankruptcy law, not state law. Debts payable to third persons can be viewed as maintenance or support obligations; the crucial issue is the function the award was intended to serve. Though the court regards the decisions of the state courts with deference, bankruptcy courts are not bound by state laws that define an item as maintenance or property settlement, nor are they bound to accept a divorce decree's characterization of an award as maintenance or a property settlement.
Appellant filed a petition under Chapter 7 of the Bankruptcy Code and listed as debts his financial obligations to appellee under a divorce decree. Appellee filed objections, arguing that the obligations were for support and maintenance and, therefore, nondischargeable under11 U.S.C.S. § 523(a)(5). The bankruptcy court agreed and the district court affirmed. On appeal, appellant argued that the debts were dischargeable as property settlement.
Were the debts dischargeableas "property settlement"?
The appellate court affirmed the judgment and held the bankruptcy court could reasonably find that the financial transfers prescribed by the divorce decree were intended to help appellee meet her monthly living expenses. The undertakings by appellant to pay appellee's debts and the required periodic payments were "support" for bankruptcy purposes regardless of the fact that the divorce decree labeled the payments as property settlement.
Undertakings by one spouse to pay the other's debts, including a debt to a lawyer for fees, can be "support" for bankruptcy purposes. So can periodic payments required to be made to a former spouse, even if the decree labels these payments a "property settlement." Whether in any given case such obligations are in fact for "support" and therefore not dischargeable in bankruptcy, is a question of fact to be decided by the Bankruptcy Court as trier of fact in light of all the facts and circumstances relevant to the intention of the parties. A finding of fact on such a question may be set aside by the District Court or by us only if clearly erroneous. The findings made in this case do not fall in that category, and the judgment is therefore