Bailey v. Bailey, 665 B.R. 297

Rebecca Bailey (Plaintiff) and Steven Bailey (Defendant) were involved in a contentious divorce, during which Steven was ordered to deposit all construction company proceeds in a company account but failed to do so.
The divorce decree ordered Steven to pay Rebecca $160,000 (her half of missed business proceeds), $45,000 (her interest in the business), and ongoing maintenance ($250/month), but he never paid the two lump sums.
In 2022, Steven filed for Chapter 13 bankruptcy. Rebecca filed this adversary action to except the unpaid amounts from discharge, arguing they were either obtained through fraud/defalcation in a fiduciary capacity or were non-dischargeable domestic support obligations.
The bankruptcy court initially ruled in Steven’s favor; Rebecca appealed; the appellate panel reversed and remanded certain claims for trial.
On remand, Rebecca again sought summary judgment asserting the divorce and restraining orders created a trust and domestic support obligations; the court denied this and found for Steven after trial.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Did the restraining order create an express/technical trust, making the $160,000 non-dischargeable under §523(a)(4)?	The restraining order was like a trust: intent, res, beneficiary, and trustee all met.	The order was an interim asset freeze, not a trust; no such language or structure.	No express or technical trust created; §523(a)(4) does not apply.
Were the $160,000 and $45,000 lump sums non-dischargeable as domestic support obligations under §523(a)(5)?	Lump sums represented support considering her lack of assets/income, duration of marriage.	Lump sums were property division, not support—only $250/month is support.	Lump sums were not in the nature of support; only ongoing maintenance is.
Was parol evidence (Judge’s deposition) admissible to show support intent?	Judge Flatt’s intent relevant to determine support vs. property division.	Divorce Decree is unambiguous; parol evidence not allowed.	Parol evidence inadmissible because the decree is unambiguous.
Did Rebecca prove by a preponderance of the evidence her entitlement to §523(a)(4) or (a)(5) relief?	Yes; relies on order language and expert/judicial intent.	No; claims unsupported by law and fact.	No; failed to prove trust intent or support nature by required standard.

Patel v. Shamrock Floorcovering Servs., Inc., 565 F.3d 963 (6th Cir. 2009) (explains that technical trusts for § 523(a)(4) can arise from statute or explicit agreement)
Bd. of Trs. of Ohio Carpenters’ Pension Fund v. Bucci (In re Bucci), 493 F.3d 635 (6th Cir. 2007) (sets elements for fiduciary relationship under § 523(a)(4))
Long v. Piercy (In re Piercy), 21 F.4th 909 (6th Cir. 2021) (clarifies standards for defalcation/fiduciary relationship for nondischargeability)
Sorah v. Sorah (In re Sorah), 163 F.3d 397 (6th Cir. 1998) (addresses standards for distinguishing support from property division in bankruptcy nondischargeability)
In re Calhoun, 715 F.2d 1103 (6th Cir. 1983) (lays out factors for determining if divorce obligations are in the nature of support)