Appeal from the United States Bankruptcy Court for the Southern District of Ohio, Eastern Division at Columbus. No. 97-50374; Adv. No. 97-0094
Before: Baxter, Lundin, and Rhodes, Bankruptcy Appellate Panel Judges.
Argued: September 2, 1998
This appeal concerns the dischargeability of debts that arose out of a property settlement incorporated in a decree of dissolution of marriage wherein the Plaintiff, Anna Hart, was to be held harmless by the Debtor. The bankruptcy court determined the debts to be non-dischargeable pursuant to 11 U.S.C. § 523(a)(15), finding that the Debtor had the ability to pay the debts and that the detriment to the Plaintiff of discharge would outweigh the benefit to the Debtor.
We affirm the bankruptcy court's holding that the obligation owed by the Debtor is non-dischargeable pursuant to § 523(a)(15). The Debtor has not met his burden of proof in demonstrating that either he does not have the ability to pay or that discharging the obligation would result in a benefit to him that outweighs the detrimental consequences to Anna Hart.
Whether the Debtor's hold harmless obligations to his former spouse are non-dischargeable under 11 U.S.C. § 523(a)(15).
II. JURISDICTION AND STANDARD OF REVIEW
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to hear appeals of final orders. The United States District Court for the Southern District of Ohio has authorized appeals to the BAP. A "final order" of a bankruptcy court may be appealed by right under 28 U.S.C. §158(a)(1). For purposes of appeal, an order is final if it "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S. Ct. 1484, 1497, 103 L.Ed.2d 879 (1989) (citations and internal quotations omitted). "Determinations of nondischargeability under § 523(a) are final orders for appeal purposes." National City Bank v. Plechaty (In re Plechaty), 213 B.R. 119, 121 (B.A.P. 6th Cir. 1997) (citations omitted).
The bankruptcy court's finding of facts are reviewed for clear error and its Conclusions of law are reviewed de novo. Nicholson v. Isaacman (In re Isaacman), 26 F.3d 629 (6th Cir. 1994); Longo v. McLaren (In re McLaren), 3 F.3d 958, 961 (6th Cir. 1993); In re Plechaty, 213 B.R. at 121. A de novo review allows the reviewing panel to look at the interpretation and application of relevant statutes independent of the determination of the bankruptcy court. National City Bank v. Elliot (In re Elliot), 214 B.R. 148, 149 (B.A.P. 6th Cir. 1997). As the interpretation and application of § 523(a)(15) involves Conclusions of law, we review such de novo. United States v. Stephens, 118 F.3d 479, 481 (6th Cir. 1997); Taylor v. Taylor, 199 B.R. 37, 40 (Bankr. N.D. Ill. 1996). The Panel must affirm the underlying factual determinations unless they are clearly erroneous. In re Plechaty, 213 B.R. at 121.
The Debtor, Joseph Molino (Molino), and Anna Hart (Hart) are former spouses whose marriage was terminated pursuant to a decree of dissolution (Decree). The Amended Separation Agreement, incorporated into the Decree, required Molino to pay two home equity loans that totaled $22,434.98. The Decree also required Molino to hold Hart harmless on those debts. Hart was awarded the homestead property that secured these loans.
Molino failed to meet the terms of the Separation Agreement. Hart was forced to sell the homestead property and paid the loans in full from the sale proceeds. Subsequently, Hart and her new husband purchased a home with the remaining proceeds from the sale.
Molino sought relief under Chapter 7. Thereupon, Hart filed a complaint asserting nondischargeability under 11 U.S.C. §§ 523(a)(5) and (15) for the debts subject to the hold harmless provisions in the Separation Agreement. After a trial, the bankruptcy court determined that Molino's obligation to Hart was excepted from discharge pursuant to § 523(a)(15). Molino argues that he should receive a discharge pursuant to § 523(a)(15)(A) because he does not have the ability to pay the debt from income or property which is not reasonably necessary for his maintenance and support, or pursuant to § 523(a)(15)(B) because a discharge would result in a benefit to him that outweighs the detriment to Hart.
Molino further argues that he does not have the ability to pay this debt because he has voluntarily chosen to refrain from seeking future paid employment. Prior to his separation from Hart, Molino was an independent business person earning a yearly income of $48,000. Molino testified that he intends to continue assisting at a bar and grill in which he was a shareholder prior to the bankruptcy filing. Further, he intends to continue to assist his new wife in her dog grooming business. For assisting at the bar, Molino receives $50 to $90 per week which he describes as a reimbursement for costs he incurs traveling to and from the bar. As consideration for assisting his ...