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Bankruptcy, Divorce, and Domestic Support Obligations

Posted By Allmand Law Firm, PLLC || 19-Dec-2016

Is a private contract made between spouses in a pro se divorce case considered a non-dischargeable domestic support obligation under the United States Bankruptcy Code?

Dixon v. Bellard

This article is a case summary of late-breaking case law in the United States Bankruptcy Court for the Northern District of Texas, Amarillo Division. This article is for informational purposes only. This article does not constitute legal advice, nor does the article purport that all similar bankruptcy cases will have the same outcome. If you or a loved one are facing bankruptcy or divorce, please seek appropriate legal counsel.

A Pro Se Divorce Agreement leads to Bankruptcy Complications

On October 15, 2012, then-spouses Emory Bellard, III and Rachel Dixon entered into a private contract in advance of their impending divorce whereby Bellard agreed to pay his wife $3,000.00 per month for ten years. At the time of the agreement, Bellard made over six figures in the technology industry. Several months later, the couple filed a fast-track, pro se divorce petition in a Florida state family court. In the uncontested divorce filing, neither Bellard nor Dixon mentioned the private contract. The final decree of divorce was silent as to the financial agreement between the now-divorced couple. Bellard made the payments for two years until he fell on hard times.

In 2014, Bellard was out of work, newly re-married with several dependents, and upside-down in debt. He filed for chapter 7 bankruptcy, seeking relief from his financial trouble, listing the debt owed to Dixon in the private contract as a disputed, yet unsecured by tangible property, non-priority claim. This meant that Dixon would have a slim chance of getting paid the funds originally agreed upon in 2012 because Dixon’s claim would be last in line for any potential disbursement from the Trustee. Wanting to be paid what she believed she was entitled to under the private contract, Dixon filed an adversarial claim in bankruptcy court against Bellard, alleging that the balance owed totaled $62,099.91.

To Discharge, or Not to Discharge?

In her suit, Dixon argued that she was entitled to the funds under §523(a)(5) of the Bankruptcy Code, as the private agreement fulfilled the definition of a non-dischargeable domestic support obligation, even though it was a private support obligation. Bellard, on the other hand, argued that the private agreement was null and void because there was no alimony provision in the final decree of divorce, and because the private agreement itself was never mentioned in the Florida divorce court. Ballard argued that for the debt to be considered non-dischargeable, the contract itself must first be found valid and enforceable under Florida law. Both Bellard and Dixon filed for summary judgment for relief in the Northern District of Texas.

§523(a)(5) of The Bankruptcy Code

Under §523(a)(5) of the Bankruptcy code, domestic support obligations are excepted from discharge in a chapter 7 bankruptcy. “Domestic Support Obligation” is defined as “a debt that is owed to or recoverable by a former spouse in the nature of alimony, maintenance or support, regardless of how designated; and arises by a separation agreement.” 11 U.S.C. §101(14A). Further, “dischargeability is a matter of federal bankruptcy law, not state law.” Dennis v. Dennis, 25 F.3d 274, 277-78 (5th Cir. 1994). “The applicable state law’s role is merely to shed light on the intention of the parties at the time of the agreement...even if state law does not provide for alimony [in name].” Crist v. Crist, 632 F.2d 1226, 1229 (5th Cir. 1980); Dennis, 25 F.3d at 278.

The Northern District Weighs In

On October 17, 2016, the Northern District heard the adversarial case Dixon v. Bellard to determine whether the private agreement made prior to their simplified pro se divorce would be considered a non-dischargeable domestic support obligation under the Bankruptcy Code. The Court held that the private agreement did satisfy the Code’s definition of a domestic support obligation because the agreement was voluntarily entered into in connection with the parties’ uncontested divorce. Moreover, the Court stated that the agreement did impose an obligation to make domestic support payments directly to Dixon. The Court was adamant that the Bankruptcy Code “provides that a domestic support obligation is non-dischargeable, period.” The Court denied Bellard’s motion for summary judgment and granted Dixon’s motion for summary judgment. After this ruling, Bellard will not be able to have the debt discharged and must make the agreed upon payments pursuant to the terms of the contract. Here, the Court is saying that, yes, a private agreement between divorced spouses made pursuant to a divorce for support purposes, may indeed be considered a domestic support obligation, which is a non-dischargeable debt in federal bankruptcy court.

If you have questions regarding your unique financial situation, including domestic support obligations, and whether bankruptcy may be an option for you, contact Allmand Law Firm, PLLC for a FREE financial empowerment session. Our bankruptcy attorneys serve clients throughout Dallas – Fort Worth and beyond.

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