In re Crosswhite,
148 F.3d 879 (1998).



Facts: In the property settlement agreement that was incorporated in the divorce judgment, Maurice Crosswhite (D) agreed to assume, pay, and hold Terry Crosswhite (now Ginter) (P) harmless on two joint debts, $3,489 to Merchants Bank (to purchase D's boat) and $1,700 to the General Federal Credit Union (to improve the real estate retained by D). D did not pay the debts and filed a bankruptcy petition. When the bank brought suit, P paid the debt. When the credit union threatened to sue, P restructured the loan and made monthly payments to pay it. P initiated an adversary proceeding in D's bankruptcy by filing a complaint to determine the dischargeability of D's property settlement agreement obligations under section 523(a)(15) of the Bankruptcy Code. The bankruptcy court held the obligations were dischargeable and entered judgment for D. The district court affirmed. P appeals.

Issue:Whether a court consider capital assets available for liquidation when awarding support and maintenance?

Rule:Creditor seeking exception of nonsupport divorce debt from discharge has burden of proving initially that claim falls within discharge exception by demonstrating that debt does not fall under exception for support, alimony, and maintenance, but nevertheless was incurred by debtor in course of divorce or in connection with divorce decree or similar agreement

Holding: Yes.. Judgment vacated and remanded. Court held that: (1) once creditor has made required showing that debt falls within discharge exception for divorce-related debt that is not support, maintenance, or alimony, burden of applicability of either of two statutory exceptions to nondischargeability rests with debtor; (2) remand was required with regard to determination that benefit of discharging debtor's property settlement obligations outweighed detriment to former wife; and (3) contributions that debtor's live-in girlfriend made to household living expenses were properly considered in determining whether benefit to debtor of discharge outweighed detriment to former wife.

Analysis:Under the terms of their divorce agreement, appellee debtor agreed to assume certain marital obligations. After appellee failed to satisfy those debts and filed a Chapter 7 petition, appellant wife paid the amounts owed and brought an adversary proceeding to determine the dischargeability of the property settlement agreement. The bankruptcy court ruled that appellee's obligation was dischargeable under 11 U.S.C.S. § 523(a)(15)(B), and the district court affirmed. Appellant sought further review. In vacating and remanding with instructions to remand to the bankruptcy court for new factual findings under the proper burden of proof, the court concluded that the lower courts erred in placing the burden of proof on appellant.