496 B.R. 828
Bankr. N.D. Tex.2013Background
- De Boer and Talsma divorced in 2006; Divorce Decree obligated Talsma to pay $100,000 by 2008 and $2,000,000 by 2015.
- On June 1, 2010, Talsma filed Chapter 11; he owed $15,000 on the 2008 obligation and $2,000,000 on the 2015 obligation.
- De Boer filed a proof of claim designating the claim as a priority domestic support obligation under 11 U.S.C. § 507(a)(1); the Debtor did not object.
- Debtor filed multiple plans and disclosures; De Boer voted for the Third Amended Plan in May 2011, noting the claim value as $2,000,000 on the ballot.
- Confirmation Order entered June 8, 2011; Debtor began payments under the Plan and has been current; no party appealed the Confirmation Order.
- Court must determine whether a debtor may discharge a non-dischargeable domestic support obligation in Chapter 11 when the creditor participated in the case, including filing a Claim and voting for the Plan; court holds domestic support obligations are not dischargeable and the Plan cannot discharge the remainder of the debt.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a domestic support obligation is dischargeable in Chapter 11 if creditor participates | De Boer argues the Claim is non-dischargeable despite plan | Talsma argues plan reduces liability and precludes discharge | Not dischargeable; Espinosa framework controls |
| Effect of Espinosa and subsequent cases on plan reductions of non-dischargeable debt | Espinosa allows discharge of dischargeable portions; Diaz limits discharge of DSOs | Plan may reduce claims with creditor consent | Espinosa/Diaz preclude discharging DSOs; plan cannot void remainder |
| Impact of De Boer’s vote and lack of objection on dischargeability | Vote should not affect nondischargeability | Vote and plan objections could bind rights | Vote/plan cannot alter non-dischargeable nature; claim remains nondischargeable |
Key Cases Cited
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (Supreme Court 2010) (discharge of student loans under 523(a)(8) and jurisdictional considerations; limits on discharging non-dischargeable debts via plan)
- Fla. Dept. of Revenue v. Diaz (In re Diaz), 647 F.3d 1073 (11th Cir. 2011) (DSOs not dischargeable; creditor’s involvement does not nullify non-dischargeability)
- Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. 1985) (creditor’s asserted rights and plan confirmations cannot misconstrue Code; preclusion of discharge not allowed to override statute)
- Taylor, 132 F.3d 256 (5th Cir. 1998) (principles limiting plan-based relief inconsistent with the Code)
- Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir. 1987) (Shoaf exception to preclusion for plan outcomes; not controlling where DSOs are involved)
- Sun Finance Co. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. 1992) (preclusion analysis—Howard exception to Shoaf for protected claim types)
- In re Chesnut, 356 Fed.Appx. 732 (5th Cir. 2009) (cited for general principles on nondischargeable debts and credibility of plan effects)