IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 97-10454
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In The Matter Of: SIM MICHAEL GAMBLE,
Debtor.
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SIM MICHAEL GAMBLE,
Appellant,
versus
ARCINA ANN GAMBLE,
Appellee.
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Appeal from the United States District Court for the
Northern District of Texas
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Junw 22, 1998
Before JOLLY, DUHÉ, and PARKER, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
Sim Michael Gamble apparently concluded that he was unable to
pay his ex-wife on an obligation arising out of the property
settlement incident to their divorce. Upon her serious demands for
payment, he headed for the bankruptcy court. Once there, he argued
that the debt was dischargeable. The bankruptcy court disagreed
and so do we. In particular, we hold that the bankruptcy court did
not err in concluding that Mr. Gamble failed to meet either
exception to the nondischargeability of such debts as provided in
11 U.S.C. § 523(a)(15), and therefore affirm its judgment.
I
In 1986, while he and Arcina Ann Gamble were married, Mr.
Gamble went to work at Security National Bank of Quanah in Quanah,
Texas. In support of his position at the bank, the couple
purchased some bank stock for $216,000. Of this money, $116,000
was borrowed from an Abilene bank; the other $100,000 came from an
inheritance belonging to Ms. Gamble. In 1990, the Gambles
divorced. In the divorce decree, Mr. Gamble was awarded the bank
stock. In return, he assumed sole responsibility for the $116,000
loan, and, in addition, signed a note to Ms. Gamble for $100,000.
This note carried no interest, and was set to become due and
payable three years from July 19, 1990.
II
By June 20, 1995, the $100,000 note was twenty-three months
overdue and still unpaid. Ms. Gamble therefore went to state court
and reduced the note to judgment, which was entered August 3. On
September 1, Mr. Gamble filed for bankruptcy liquidation under
Chapter 7. In response, Ms. Gamble filed an adversary proceeding
in the bankruptcy court to prevent discharge of the judgment on the
$100,000 note. She argued that it fell within the exception for
property settlement debts contained in 11 U.S.C. § 523(a)(15).
Section 523(a)(15), under the general heading of “Exceptions to
discharge,” provides, in relevant part:
A discharge . . . does not discharge an individual debtor
from any debt . . . [not in the nature of alimony or
child support as exempted under § 523(a)(5)] that is
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incurred by the debtor in the course of a divorce or
separation . . . unless--
(A) the debtor does not have the ability to pay
such debt from income or property of the debtor not
reasonably necessary to be expended for maintenance
or support of the debtor or a dependent . . .; or
(B) discharging the debt would result in a benefit
to the debtor that outweighs the detrimental
consequences to a . . . former spouse of the
debtor.
After verifying that the debt in question was in fact incurred
in the course of a divorce, the bankruptcy court addressed the two
listed exceptions. On the evidence before it, the court found that
Mr. Gamble had not shown that he lacked the ability to pay the debt
from his disposable income or that the benefit to him of discharge
would outweigh the detriment to Ms. Gamble under the totality of
the circumstances. In support of its findings, the court noted
that Mr. Gamble had manipulated his finances, by continuing to pay
off another $100,000 unsecured and dischargeable note to his
father, by including some questionable expenses in the formulation
of a monthly budget, and by deleting his new wife’s income from his
characterization of the total family income used to defray joint
expenses. For these reasons, the court concluded that the $100,000
debt to Ms. Gamble was not subject to discharge. The district
court affirmed the bankruptcy court’s ruling, from which final
decision Mr. Gamble timely appeals.
III
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We review the bankruptcy court’s findings of fact for clear
error and its conclusions of law de novo. In re Hamilton, 125 F.3d
292, 295 (5th Cir. 1997).
IV
In appealing the bankruptcy court’s ruling, Mr. Gamble asserts
no less than seventeen points of reversible error. The actual
issues are fewer in number. Essentially, Mr. Gamble challenges the
determinations made by the bankruptcy court under § 523(a)(15) and
the methods used to reach those determinations. He makes four
distinct arguments.
A
First, Mr. Gamble argues that § 523(a)(15) was not meant to
apply to all property settlement debts between husband and wife,
but instead only to those situations where the debtor has agreed to
indemnify his former spouse against a marital debt owed to a third
party in exchange for lower alimony payments or a more favorable
property settlement. In Mr. Gamble’s view, Congress enacted
§ 523(a)(15) after realizing that allowing discharge of these
indemnification agreements (which are not exempt under § 523(a)(5)
as they are not in the nature of alimony or child support) often
left the former spouse to pay marital debts on her own, and with an
unfairly reduced amount of property and/or alimony to do so.
Section 523(a)(15) came into being, Mr. Gamble contends, to right
this single specific wrong.
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Although Mr. Gamble’s position finds express support in the
legislative history, see H.R. Rep. No. 103-835, at 54 (1994),
reprinted in 1994 U.S.C.C.A.N. 3363; In re Macy, 200 B.R. 467, 471
(D. Mass. 1996), it is clearly contrary to the statutory language
and thus unpersuasive. Section 523(a)(15) purports to apply to
“any debt . . . [not in the nature of alimony or child support]
that is incurred in the course of a divorce or separation,” and the
bankruptcy court was clearly correct to give this provision the
full reach implicated by its plain language. See BFP v. Resolution
Trust Corp., 511 U.S. 531, 566 (1994) (Scalia, J.) (in interpreting
the Bankruptcy Code, “‘as long as the statutory scheme is coherent
and consistent, there generally is no need for a court to inquire
beyond the plain language of the statute’”) (quoting United States
v. Ron Pair Enterprises, Inc., 489 U.S. 235, 240 (1989)). As there
is no dispute that the debt in question was incurred in the course
of a divorce and is not in the nature of alimony or child support,
there can be no dispute that § 523(a)(15) is controlling and
dispositive as to that debt’s dischargeability.
B
Mr. Gamble next complains that, even if § 523(a)(15) is the
relevant provision, the bankruptcy court erred in its allocation of
the burden of proof under that section. In assessing the evidence,
the bankruptcy court assigned Ms. Gamble the initial burden of
showing that § 523(a)(15) was applicable to the debt in question,
whereupon Mr. Gamble had the burden of proving that one of the
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exceptions applied to take it out. We find nothing amiss in this
arrangement. It accords with traditional notions of the prima
facie case and affirmative defense, is in line with the rulings of
the majority of courts to have considered the issue, see, e.g., In
re Custer, 208 B.R. 675, 681-82 (Bankr. N.D. Ohio 1997) (citing
cases); In re Stone, 199 B.R. 753, 760-62 (Bankr. N.D. Ala. 1996)
(collecting, summarizing, and analyzing twenty-eight cases applying
the rule), and is completely consistent with the statutory
language. There is accordingly no error to be found on this point
either.
C
Third, Mr. Gamble insists that, even if § 523(a)(15) is the
relevant provision and he correctly bore the burden of proof as to
the exceptions, the bankruptcy court nonetheless clearly erred in
finding that he had the ability to pay under the first exception,
§ 523(a)(15)(A). In support of this contention, Mr. Gamble notes
that the debt in question had long since become due in full, and
that he undisputedly did not have $100,000 in available funds at
the time of the bankruptcy.
Contrary to Mr. Gamble’s semantic intimations, the plain
language of the statute speaks of an “ability to pay . . . from
income” as well as from property. We therefore find that the
bankruptcy court was correct to focus its investigation of ability
to pay on whether Mr. Gamble could make reasonable payments on the
debt from his disposable income. See In re Jodoin, 209 B.R. 132,
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142 (B.A.P. 9th Cir. 1997); In re Dressler, 194 B.R. 290, 304
(Bankr. D. R.I. 1996). After an independent review of the record,
we further hold that the court was not clearly in error in
determining that he had not shown an inability to make such
payments. In this regard, we note particularly the findings that
Mr. Gamble had been voluntarily making payments on a dischargeable
debt to his father and that he attempted to conceal his new wife’s
contribution to household income. As to the latter, see
particularly In re Haines, 210 B.R. 586, 590-91 (Bankr. S.D. Cal.
1997), and In re Adams, 200 B.R. 630, 633-34 (N.D. Ill. 1996),
which discuss the correctness of counting a new spouse’s
contribution to household income under § 523(a)(15)(A). For all of
these reasons, we conclude that there was no error in the court’s
assessment of the first exception.
D
Finally, Mr. Gamble pleads that, even if § 523(a)(15) is the
relevant provision and he correctly bore the burden of proof as to
the exceptions, and even if the bankruptcy court correctly found
that he had not shown an inability to pay under the first
exception, it nonetheless clearly erred in finding that he had
failed to show that the benefit of discharge outweighed the
detriment to Ms. Gamble under the second exception,
§ 523(a)(15)(B). In support of this last point, Mr. Gamble notes
that Ms. Gamble currently has a net worth of approximately
$500,000, while he is significantly in the red. As the bankruptcy
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court correctly determined, however, an assessment of benefit and
detriment under the second exception implicates an analysis of the
totality of the circumstances, not just a comparison of the
parties’ relative net worths. See In re Haines, 210 B.R. at 594;
In re Morris, 193 B.R. 949, 954 n.8 (Bankr. S.D. Cal. 1996); In re
Hill, 184 B.R. 750, 756 (Bankr. N.D. Ill. 1995). After an
independent review of the record on this point, we cannot say that
the bankruptcy court clearly erred in its analysis of these
circumstances. In this respect, we note particularly the
bankruptcy court’s findings that Mr. Gamble had a much greater
earning capacity than Ms. Gamble, as she lacked a college
education, and that Ms. Gamble had need of her admittedly
substantial assets to provide for the care of her ailing mother.
For these reasons, we find no error in the court’s assessment of
the second exception either.
V
Having found no error in the determinations made by the
bankruptcy court under § 523(a)(15) or the methods used to reach
those determinations, for the foregoing reasons, the judgment of
the district court is
A F F I R M E D.
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