MARTIN VS. MARTIN (DIVORCE PROPERTY & ALIMONY)

Key holdings

Practitioner summary

Per Curiam. Federal bankruptcy law determines whether a liability may be discharged, and obligations for alimony, maintenance, and support are not dischargeable, 11 U.S.C. section 523(a)(5). Non-dischargeable debts include debts resulting from an agreement to hold the debtor's spouse harmless, to the extent the agreement is in payment of alimony, maintenance, or support, In re Calhoun, 715 F.2d 1103 (6th Cir. 1983). The critical issue is the function the award was intended to serve, In re Williams, 703 F.2d 1055 (8th Cir. 1983); a hold-harmless provision qualifies as support if, without the debt assumption, the spouse would be inadequately supported, Holt v. Holt, 672 P.2d 738 (Utah 1983). Here the husband assumed the community credit-card debts in exchange for lower monthly child support, so his obligation to assume the debts was directly tied to his child-support obligation; his breach unilaterally altered the amount of support the wife received and left her inadequately supported. His obligation to the wife under the decree was therefore non-dischargeable, even though his personal obligations to the creditor banks were properly discharged, because his liability to her arose out of the decree. The Court affirmed the order requiring the husband to reimburse the wife and fulfill his obligations under the decree.

In plain language

In their divorce, James Martin agreed to pay child support and to take sole responsibility for two credit-card debts, in exchange for paying a lower amount of monthly child support. Shortly after the decree, James filed for bankruptcy and discharged those credit-card debts - leaving his ex-wife Judy personally on the hook for them. Judy asked the court for support. The district court found that James's promise to hold Judy harmless on the debts was really 'in the nature of alimony, maintenance and support,' because without it Judy would have been inadequately supported. It ordered James to reimburse Judy. James appealed, arguing the debts had been wiped out in bankruptcy. The Nevada Supreme Court affirmed. Federal bankruptcy law decides whether a debt can be discharged, and obligations for alimony, maintenance, and support cannot be discharged. A 'hold harmless' promise counts as non-dischargeable support if, without the debt assumption, the spouse would be inadequately supported. Here, because James assumed the debts in exchange for lower child support, his obligation was directly tied to child support; when he broke that promise, he effectively reduced the child support Judy received. While his personal obligations to the credit-card companies were properly discharged, his separate obligation to Judy arose from the divorce decree and was not discharged.