Yet another lesson that divorce decrees do not bind creditors, or trump a bankruptcy discharge –
In McGahee v. Rogers, No. 06A0885, 2006 Ga. LEXIS 674 (Ga. July 13, 2006), the husband
was liable for certain joint debts pursuant to the divorce decree.
The final decree incorporated a settlement agreement pursuant to which neither party received alimony. However, the agreement did address the joint marital debts, and specified that each party would assume the obligation to pay certain of them and would indemnify and hold the other harmless for those that he or she assumed. The debts for which McGahee assumed responsibility included one owed to the Internal Revenue Service and another for the loan secured by a car to which he took title and possession. The tax liability was incurred when McGahee withdrew money from his IRA, but failed to include the withdrawn amount as income on the joint return which he and Ms. Rogers filed. The money from the IRA was used for household expenses and other items.
The husband then filed a Chapter 7 and received a general discharge, and the IRS and creditor went after the wife for payment of the debts at issue. The wife filed a motion for criminal contempt against the husband for his alleged failure to comply with the divorce decree. The husband defended on the basis that the debts were discharged, although no specific determination was made by the Bankruptcy Court.
The court, under its concurrent jurisdiction, held that the debts were discharged under Section 523(a)(5) —
Ms. Rogers contends that the debts are not dischargeable because they were not secured by any property and were incurred for necessities, such as living expenses and an automobile, which constitute support. However, the underlying nature of the debts themselves does not have any legal consequence. The controlling issue is whether, at the time the settlement agreement was reached, the parties intended that McGahee’s assumption of the obligation to pay the debts constitute an element of support for Ms. Rogers. As to that issue, the undisputed evidence demands a finding that they did not have that intent. Instead, the debt allocation was a element of the division of their marital property.
With respect to the attorneys fees awarded by the trial court, "McGahee [Husband] was justified in maintaining a "stubborn stance" with regard to his discharge in bankruptcy defense, since, for the reasons discussed in Division 1, he was entitled to prevail on that defense. "