Schultz v. Downing
24-08019
Bankr. D. Neb.Mar 11, 2025Background
- Amber Schultz, the plaintiff and ex-wife of Bradley Downing, sought to except a divorce property settlement from Downing's bankruptcy discharge.
- The settlement stemmed from a 2023 Nebraska state court divorce decree; Schultz was awarded $88,231 after findings that Downing had transferred marital assets for less than fair value.
- Schultz alleged that Downing's bankruptcy schedules omitted material information, specifically ongoing child support she paid.
- Downing filed a Chapter 13 bankruptcy in August 2024; Schultz filed her adversary complaint just before the deadline for discharge objections.
- Schultz asserted her debt was non-dischargeable under 11 U.S.C. § 523(a)(4) (fraud or defalcation by fiduciary) and § 523(a)(15) (debts to a spouse from divorce).
- Judge Kruse granted Downing's unopposed motion for summary judgment, dismissing Schultz's claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Discharge of property settlement (§523(a)(15)) | Divorce judgment debt is excepted from discharge | Not applicable in Chapter 13 cases | Not excepted from discharge in Chapter 13 |
| Fiduciary relationship (§523(a)(4)) | Marital relationship creates fiduciary duty | No fiduciary duty exists under federal law | No fiduciary duty found under §523(a)(4) |
| Fraud or defalcation in context of divorce | Downing committed fraud regarding marital property | No fraud under required standard | No valid claim stated under §523(a)(4) |
| Need for trial | Alleged facts justify trial | No material factual dispute, purely legal | No dispute; judgment for defendant granted |
Key Cases Cited
- In re Petersen, 564 B.R. 636 (Bankr. D. Minn. 2017) (explains the bankruptcy policy of granting a fresh start to honest debtors)
- In re Dailey, 592 B.R. 341 (D. Neb. 2018) (exceptions to discharge are narrowly construed against creditors)
- Bush v. Taylor, 912 F.2d 989 (8th Cir. 1990) (discusses when a fiduciary relationship may arise in divorce property context)
- Teichman v. Teichman (In re Teichman), 774 F.2d 1395 (9th Cir. 1985) (property settlement debts generally aren't fiduciary relationships for §523(a)(4))
- Ashley Cnty., Ark. v. Pfizer, Inc., 552 F.3d 659 (8th Cir. 2009) (standard for summary judgment and judgment on pleadings)