In the Matter of Mason: Debt to a former spouse is non-dischargeable in bankruptcy

The Facts

Husband and Wife divorced, and the final decree directs Wife to pay 50% of Husband’s 2006 taxes. Wife later files for Chapter 7 bankruptcy, listing her obligation under the divorce decree in the bankruptcy petition. She lists Husband as a co-debtor on the tax debt, and as a creditor holding an unsecured non-priority claim. Wife received a discharge from the U.S. Bankruptcy Court. Each spouse petitioned the IRS for “innocent spouse” relief from their federal income tax liability for 2006. The Wife’s petition was granted, the Husband’s denied.

Husband filed a motion for contempt, asking the trial court to compel the wife to pay the obligation to him as ordered in the divorce decree. The trial court denied the motion, reasoning that:

[Wife] sought to have her debt to [Husband] discharged in bankruptcy. Toward [that] end, in her bankruptcy petition [Wife] noticed [Husband] as a creditor for “2010: divorce settlement” in the amount of the original debt to the IRS. [Husband] was duly noticed that he was listed as a creditor and had the opportunity to litigate the issue in the bankruptcy court. [Husband] was granted a bankruptcy and the debt was discharged.

The Appeal

Husband appealed, arguing that: 1) the trial court erred as a matter of law when it found that Wife’s obligation to pay 50% of his 2006 federal income taxes had been discharged in bankruptcy because he failed to litigate in the bankruptcy court that her obligation was non-dischargeable; and, 2) that the trial court erred as a matter of law and unsustainably exercised its discretion when it declined to award him attorney’s fees and costs.

The Supreme Court issued an opinion on November 28, 2012. 

The Holding

Wife’s debt to Husband to pay 50% of his 2006 taxes was automatically non-dischargeable under 11 U.S.C. § 523(a)(15) as a debt to a former spouse. Even if the Wife was ordered to make payments on the obligation to a third party instead of directly to Husband, it is still a debt to the spouse and therefore non-dischargeable.

The trial court did not err when it declined to award Husband attorney’s fees. The general rule in New Hampshire is that each party must bear their own costs in litigation. A prevailing party may only recover attorney’s fees when it is authorized by statute, there is an agreement between the parties allocating or awarding attorney fees, or there is an established judicial exception to the general rule. Exceptions to the general rule include:

(W)here an individual is forced to seek judicial assistance to secure a clearly defined and established right if bad faith can be established; where litigation is instituted  or unnecessarily prolonged through a party’s oppressive, vexatious, arbitrary, capricious or bad faith conduct; as compensation for those who are forced to litigate in order to enjoy what a court has already decreed; and for those who are forced to litigate against an opponent whose position is patently unreasonable.

The Supreme Court noted that although it held that Wife’s position was erroneous under the law, her position was not patently unreasonable. Therefore, Husband was not entitled to an award of attorney’s fees.

The Takeaway

Whether a financial obligation to a former spouse is incurred by an agreement approved by the court or by court order, that obligation cannot be discharged in bankruptcy. Plan on the obligation surviving the discharge, and ask your bankruptcy attorney whether the bankruptcy court can restructure the repayment of the debt. 

Top 5 things birth mothers should know about New Hampshire adoption

If you are a birth mother considering adoption, these are the top 5 things you should know about New Hampshire adoptions:

  • You have the right to have an attorney help you through the adoption process and you will not be charged for attorney services. The adoptive parents pay for your legal fees, but the attorney will work for you.  
  • Birth mothers can receive reasonable birth-related. expenses after choosing an adoptive family which are paid for by the adoptive parents
  • You can be as involved as you want in the selection of your child's adoptive family and you can choose the degree of openness of the adoption.
  • You have the right to change your mind about adoption at any time until the consent becomes final. You will not be able to legally relinquish your rights to your baby until 72 hours after the child is born.
  • Adoption can be a difficult emotional process, and you do not have to go through it alone. An experienced attorney will help you through the legal process, and you are entitled to counseling to assist you with your feelings about the adoption.

If you are a birth mother considering adoption, please contact me at anytime, and I will get back to you right away to  answer your questions and meet with you at your convenience at your home, at the hospital or at my office.

Contempt of Court

Throughout my years practicing law and in my role as a guardian ad litem, I often hear misconceptions about contempt. Usually I hear statements along the lines of “I don’t want a criminal record” or “if I am found in contempt I will be arrested.” This post is intended to dispel some of these misunderstandings and to set the record straight.

Contempt can be civil or criminal, direct or indirect. The difference between civil or criminal lies in the purpose of the punishment. Direct or indirect contempt contrasts between acts committed either in the presence or outside of the presence of the court.

Civil Contempt

A finding of civil contempt results in an order that is remedial, coercive and for the benefit of the other party. The punishment is intended to force the contemnor’s compliance with court orders. Examples of the consequences of a contempt finding include money fines, orders directing compliance with the court orders, or even an indefinite jail sentence until the contempt is cured. It is often said that the contemnor “holds the key to the jail in his pocket” because curing the contempt will set him free. In family matters, motions for contempt are often brought for failure to pay child support, failure to abide by the parenting schedule, or selling or encumbering property in violation of a non-hypothecation order. Jail is a remedy of last resort, and one that usually only follows repeated, intentional refusals to abide by court orders or extreme behavior. The court will usually exhaust other remedies, such as payment of the other parties’ attorney’s fees, before sending a person to jail for civil contempt. A civil finding of contempt does not appear on a person’s criminal record.

Criminal Contempt

In contrast, a person who has been found in criminal contempt does not hold the keys to the jailhouse, and remedying the contempt will not set him free. The punishment is punitive, and intended to protect and preserve the dignity and authority of the court. Indirect criminal contempt proceedings must generally follow to procedural formalities of criminal proceedings. The defendant is entitled to reasonable notice, providing a date and time for the proceeding and warning that the contempt is considered criminal. The prosecutor must prove the elements of contempt beyond a reasonable doubt, and the contemnor is entitled to counsel and holds the right against self-incrimination. If the court intends to impose a sentence of greater than six months, the defendant has the right to a jury trial.

An example of criminal contempt, and the confusion that can result between criminal and civil contempt, is the New Hampshire case of Mortgage Specialists v. Davey. Mortgage Specialists sued the defendants for violation of trade secrets. Following a preliminary injunction, the defendants destroyed documents in violation of the court order. The court found the defendants in contempt, believing that they had thumbed their noses at the trial court’s authority and thwarted the dignity of the process, and issued penalties including attorney’s fees, fines and a penalty of three times the amount of profits unjustly reaped from the violation of trade secrets. The Supreme Court vacated the finding because the defendants were not provided notice that the contempt proceedings would be criminal.

Indirect Contempt

Indirect contempt is conduct that takes place outside of the presence of the court. The court does not have first-hand knowledge. Instead, the acts of contempt must be proved through evidence. An interesting case that distinguishes direct contempt versus indirect contempt is Kristen McGuire v. Suzanne Collins. In McGuire, a litigant in a custody matter arrived at the courthouse smelling of alcohol. The court security officer approached the litigant, and a state trooper performed a preliminary breath test. The results were not provided to the litigant, or her attorney. However, when she appeared before the court for the hearing, the judge informed her that she had blown a .20, well above the legal limit. However, the litigant displayed no disorderly behavior in the courtroom. The judge sentenced to litigant to 30 days in jail for direct, criminal contempt for appearing before the court in an inebriated state. However, the sentence was overturned by the Superior Court following a filing for a writ of habeus corpus because the family division judge had not personally observed the elements of contempt. Instead, the court had to rely on the observations of the court staff and the preliminary breath test conducted by the state trooper to prove the elements of contempt. Therefore, the court did not have direct knowledge and could not conduct summary proceedings resulting in the immediate incarceration.

Direct Contempt

Direct contempt takes place in the presence of the court where the judge personally observes all of the elements of contempt. The following is a perfect example of direct contempt from Maryland in the case of Patrick Smith v. State of Maryland:

THE DEFENDANT: What is the maximum on contempt, sir?

THE COURT: What is the maxim um on contempt? If I am going to give you in excess of six months, I believe I have to give you a jury trial, is that correct . . . ?

[STATE’S ATTORNEY]: Yes.

THE COURT: Mr. Smith, I am not going to give you in excess of six months.

THE DEFENDANT: Let me tell you something.

THE COURT: What?

THE DEFENDANT: You say you won’t give me in excess of six months.

THE COURT: Yes.

THE DEFENDANT: You know what? You have been sitting up there in the trial in every hearing I have had for this far, right? From day one, you have been very prejudiced to the defense. I asked you, right, a while ago, you tried to skip out on even bringing forth an allegation. You say it is only a bald allegation. I am not asking you to believe me. I am asking you to bring forth the witnesses in this case who could testify --

THE COURT: I asked you if you had anything you want to say as to what sentence the Court should impose --

THE DEFENDANT: Yeah. You know what? You can give me six more months, motherfucker, for sucking my dick, you punk ass b itch. You should have a white robe on, motherfucker, instead of a black. Fuck you.

THE COURT: I find you in contempt again.

THE DEFENDANT: Fuck you in contempt again.

THE COURT: I find you three times in contempt --

THE DEFENDANT: Fuck you. And fuck.

THE COURT: On each charge, the Court will impose a sentence of five months to run consecutive to each other and consecutive to any sentence you are now serving or obligated to serve.

THE DEFENDANT: Yeah. You better leave now, you, Ku Klux Klan.

Other examples of direct contempt include assaulting another person in the courtroom or refusing to testify when ordered to do so. When direct contempt occurs, the court may skirt procedural formalities required of indirect contempt in light of the court’s direct knowledge of the contempt. The word “summarily” does not refer to the swiftness of the punishment, but rather the dispensing with the formalities that accompany a conventional trial such as service of process, notice of hearing, and submission of evidence. Instead, the court must give the contemnor oral notice of the contempt observed, an opportunity to speak in his defense, where after the court may issue a finding of guilty and pronounce sentence.