647 B.R. 419
Bankr. N.D. Okla2022Background
- Anthony J. Phillips and Audrey Bently divorced in 2012; their Decree included general "hold harmless" language requiring each party to be responsible for debts in their respective name and to hold the other harmless.
- Post‑decree, Bently retained and used a Spirit Bank joint account (she paid Phillips half the balance at divorce but he remained on the account).
- Phillips incurred debt on a Navy Federal credit card (mostly after the Decree); Navy Federal obtained a judgment and garnished $18,901.73 from the Spirit Bank account.
- Bently discovered her funds were taken and sought relief in the Divorce Action (contempt) but did not recover the money.
- Phillips later filed Chapter 7 bankruptcy and listed both Navy Federal and Bently as unsecured creditors; Bently commenced an adversary to except Phillips’s obligation to her from discharge under 11 U.S.C. § 523(a)(15).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Decree’s hold‑harmless obligation is a "debt" enforceable in bankruptcy | Bently: the Decree created an enforceable obligation to hold her harmless; it is a debt under state law and thus relevant to dischargeability | Phillips: (implied) the Decree did not create an enforceable bankruptcy debt beyond existing obligations | Held: Oklahoma law treats court‑ordered hold‑harmless obligations as debts; the obligation is a "debt" for § 523(a)(15) purposes. |
| Whether the obligation is a domestic‑support obligation under § 523(a)(5) | Bently: her claim arises from the divorce decree (but she did not press a support theory) | Phillips: (argued discharge generally) | Held: § 523(a)(5) inapplicable — the obligation is not alimony/maintenance/support. |
| Whether the hold‑harmless obligation covers debts incurred after the Decree (e.g., Navy Federal judgment) | Bently: the Hold Harmless language is broad and was intended to protect her against creditor recourse, including post‑decree debts | Phillips: post‑Decree debts fall outside the Decree’s scope and are ordinary dischargeable unsecured debts | Held: The court follows authority holding hold‑harmless provisions can reach post‑decree debts; Phillips’s obligation to reimburse Bently for amounts garnished is nondischargeable under § 523(a)(15). |
Key Cases Cited
- In re Schweitzer, 370 B.R. 145 (Bankr. N.D. Ohio 2007) (hold‑harmless provision rendered post‑divorce charges nondischargeable under § 523(a)(15))
- In re Schmitt, 197 B.R. 312 (Bankr. W.D. Ark. 1996) (context of decree can create duty to hold other spouse harmless for post‑separation debts)
- In re Wodark, 425 B.R. 834 (10th Cir. BAP 2010) (state law determines whether a divorce decree obligation constitutes a "debt" for bankruptcy purposes)
- Grogan v. Garner, 498 U.S. 279 (1991) (creditor bears preponderance standard to prove nondischargeability)
- Jones v. Jones (In re Jones), 9 F.3d 878 (10th Cir. 1993) (exceptions to discharge construed narrowly in favor of debtor, but creditor must meet burden)
- Polishuk v. Polishuk (In re Polishuk), 243 B.R. 408 (Bankr. N.D. Okla. 1999) (fees and costs arising from nondischargeable obligations may also be nondischargeable)