Montano v. Montano

1 The Court has subject matter and personal jurisdiction
pursuant to 28 U.S.C. §§1334 and 157(b); this is a core
proceeding pursuant to 28 U.S.C. §157(b)(2)(I) and (J); and these
are findings of fact and conclusions of law as required by Rule
7052 F.R.B.P. 	The underlying chapter 7 case was filed prior to
the effective date of the analogous provisions of the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No.
109-08, 119 Stat. 23 (“BAPCPA”), and therefore the changes
enacted by that legislation are not applicable to this adversary
proceeding.
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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
WILLIAM P. MONTANO,
Debtor. 	No. 7-05-14469 SA
KATHY MAE MONTANO,
Plaintiff,
v. 	Adv. No. 05-1195 S
WILLIAM P. MONTANO,
Defendant.
MEMORANDUM OPINION IN SUPPORT OF JUDGMENT
DENYING COMPLAINT CONTESTING DISCHARGE AND DISCHARGEABILITY
The complaint of Plaintiff Kathy Montoya against
Defendant/Debtor William Montano came before the Court for a
trial on the merits on August 17, 2006. 	Having considered the
evidence and the law, the Court finds that the complaint which
seeks to deny Debtor his discharge and alternatively which seeks
to have declared nondischargeable the debt owed for the former
second mortgage should be dismissed. 1
Background
The parties married in 1978 and divorced in 2000 in
Albuquerque, New Mexico. 	The marital settlement agreement
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2 Except as otherwise shown, the Court has used rounded off
numbers.
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(“MSA), dated November 24, 2000 and filed in the Second Judicial
District Court case on November 29, 2000, provides explicitly
that “[e]ach party waives any right to alimony.” 	Pl Ex 1; Def Ex
1. 	The MSA, drafted in large part by Debtor, divided the debts
and the assets between the parties, as equally as possible, which
according to Plaintiff was the intention of the parties. 	And it
provided that Debtor (petitioner in the divorce case) would keep
the real property on General Hodges NE and be responsible for the
mortgage on that property. 	The MSA also provided that Plaintiff
would keep the couple’s home on Westridge NW and be responsible
for the first mortgage to Wells Fargo but that Debtor would be
responsible for the second mortgage to Homecomings Financial for
$75,000. The MSA did not address a fourplex on Mountain Road, but
the parties treated it and the related debt as Debtor’s.
Similarly, Plaintiff kept her cat breeding and cat products
business even though that business was not addressed by the MSA.
At the time the parties divorced, Debtor held a middle
management position at Home Depot; he subsequently lost that job
and has since made his living as a handyman. 	His income has
steadily declined from $78,000 2 in 2000 (Pl Ex 19 – CY 2000 form
1040 adjusted gross income) to $38,000 in 2001 (Pl Ex 20),
$39,000 in 2002 (Pl Ex 21) (in addition, Debtor made about
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Page 3 of 	23
$20,000 from the sale of the General Hodges property, which he
invested in the purchase of his current residence), $20,000 in
2003 (Pl Ex 22) to $2,179 in 2004 (Pl Ex 23). 	His Schedule I now
shows $1425 in income, plus $750 from his live-in fiancee, for a
monthly total of $2,175.
The evidence made clear that the income figures Debtor
reported to the IRS for 2003 and 2004 are understated. 	For
example, Debtor’s bank statements showed him receiving almost
$9,000 of additional income in 2004, which he guessed came from
remodeling the kitchen of their daughter Becky. 	In addition,
Debtor used his connections with Home Depot and Home Base
personnel (perhaps through employee discounts) to obtain
materials below retail not only for his own handyman projects but
also for third persons. 	Debtor described the supplying of
materials to third persons as “conduits” and derived some
additional and almost certainly unreported income from the
“conduits”. 	Taking into account the discrepancies in Debtor’s
testimony and the exhibits (Pl Ex 24 in particular), his current
income is likely not much more than he reported on his Schedule
I.
Plaintiff is employed as a quality control specialist on the
assembly line at Intel. 	Her IRS returns for 2003 and 2004 show
adjusted gross incomes of $42,000 and $53,000 respectively (Pl
Exs 16 and 17), and her W-2 for 2005 shows $47,000 (Pl Ex 18).
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Page 4 of 	23
In 2000, the parties’ daughter Amy had total back
reconstruction surgery. 	The follow up care for the surgery
required Plaintiff to drive Amy to and from Denver every three
weeks. 	These trips, together with the monthly house payments
that were so high that she risked falling behind on them,
necessitated opening up two credit card accounts some time after
the divorce. 	When Plaintiff began to make late payments on the
second mortgage due to Debtor’s late payment to her, the interest
rates on her credit card debt through the magic of universal
default provisions skyrocketed from %5 and 7% to 25% and 26%
respectively. 	These rates, together with losses from the cat
business, led Plaintiff to refinance her home. 	Because of her
credit status, and probably because of the lack of equity in her
home, Plaintiff was able to obtain only an “80/20" loan; that is,
a first mortgage to New Century (since assigned to Chase Home
Finance) for $228,000 at a rate of 5.9% (Pl Ex 12; doc 9) and the
second to New Century (now with Wilshire) for $56,000 at 10.35%
(Pl Ex 14; doc 10). 	(The New Century second mortgage replaced an
earlier second mortgage that had a 12.875% interest rate. Pl Ex
2.) 	However, at the time of the refinance, Debtor executed a
promissory note to Plaintiff for $73,000 at 7.9% (Pl Ex 11) as a
substitute for Debtor to pay instead of paying directly on the
new second mortgage note, so that Debtor’s monthly payments were
reduced from over $800 on the Homecomings mortgage note to $560
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3 These figures do not appear in response to question 3 of
the Statement of Financial Affairs (requiring a list of all the
payments made to creditors in the ninety days immediately
preceding the filing of the petition); however, Schedule J and
the reaffirmation agreements (docs 9 and 10) confirm the figures.
Page 5 of 	23
on the note. 	(Plaintiff testified she did this in order to make
his payment burden easier and therefore make it more likely he
would actually make the payments on time.) 	The $228,000 first
mortgage note is almost five times larger than Plaintiff’s
maximum income; the size of the first and second mortgage
payments appears to require approximately $1900 in payments each
month. 3 	These payments alone must have contributed substantially
to the cash flow crisis and then to the filing of a chapter 7
petition in May 2005 (Def Ex 34) (case no. 7-05-13866, District
of New Mexico).
Plaintiff had struggled to avoid her financial difficulties
and pay her creditors. 	Anticipating (albeit inadvertently) one
of the requirements of BAPCPA, she engaged a debt consulting
company to prepare and implement a debt repayment plan. 	The
company took her money but consistently paid at least one
creditor sixty days late. 	That meant that she had to suddenly
double up on certain payments, and her credit rating suffered
more. 	With the debt repayment plan not having worked, short on
income, and unable to see how she could pay the second mortgage
(and other debts), Plaintiff filed her petition.
In 2005 Intel changed its employment compensation from the
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Page 6 of 	23
“California” method to the “New Mexico” method (her shorthand
descriptions), and as the labels imply, her income dropped. 	In
addition, she began suffering bouts of vertigo for sustained
periods of time. 	She then suffered a nervous breakdown. 	She is
also suffering from post traumatic stress disorder arising from
earlier events in her life. 	She has been undergoing therapy and
counseling for several years now. 	Despite the various
medications and treatments, she has repeatedly had to take short
term medical leave. 	That drops her income substantially. 	By
April of this year, unless things improve, she will move to
permanent disability status, which will leave her with even less
income. 	It is certainly possible that beginning in April 2007
almost her only income will be permanent disability payments of
$938 every two weeks, or about $2,032 monthly.
Plaintiff’s initial Schedule I showed monthly income of
$3,884 (May 2005), which included $560 from Debtor for the second
mortgage. 	It also included $133 from her businesses -- cats and
“internet garage” sales. 	(The latter business was started to
provide Amy with a source of income while Amy stayed home with
her son when her baby, Plaintiff’s grandchild, was in an
intensive care unit. 	The business lost money in 2004 and 2005,
but generated a slight profit in 2006.) 	Her amended Schedule I,
filed with the help of her current counsel in September 2005 (doc
15), shows no income from her employment but slightly over $3,000
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in income from her cat and cat products business. 	Since then,
however, disease decimated her cats, and her own medical
condition required that she get rid of the remaining cats, so
that source of income has ended. 	It is certainly possible
although not certain that beginning in April 2007 she will be
earning only $938 every two weeks.
In July 2005, Plaintiff, with the approval of her initial
chapter 7 bankruptcy counsel (not the counsel listed below),
decided to attempt to keep her home. 	In consequence, she
reaffirmed the enormous debts whose mortgages encumbered her
home. 	As of the trial date the balances on the first and second
mortgages together totaled $278,000. 	In her schedules she valued
the home at $285,000. 	Were she to sell the home for that amount
and pay approximately 5% in real estate commissions and closing
costs (the standard 6% realtor commission split between her and
the buyer, plus 2% for title insurance, survey, recording fees,
attorney review fees, etc.) – about $14,250, she would realize
almost $271,000 and be left with a debt of about $7,000 owing to
Wilshire. 	This analysis does not take into account the
possibility that the home may now be worth less than the $285,000
she scheduled it at in May 2005; the mortgage company’s appraisal
had put the value at $270,000. 	A sale at that gross sales price,
combined with her paying the entire 6% sales commission, would
leave a deficiency owed to Wilshire of approximately $30,000
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Page 8 of 	23
(278,000 - $248,400). 	And the recent softening of the real
estate market may mean that the home has a market value of even
less than $270,000. 	So, depending on the sales price and
transaction costs, were Plaintiff to sell her home to pay off the
mortgage debt, she could be liable for a deficiency that is as
little as $7,000 or as large as $30,000 or more.
Of course, Plaintiff is not selling her home and retiring
the debt. 	She therefore continues to be liable on both
mortgages.
In effect Plaintiff is now saddled with a significant
housing debt (or a deficiency judgment debt in the event of a
foreclosure or sale for less than what she owes on the house)
that is not subject to discharge until, at the earliest, some
time after May 2009 (if she is able to file and successfully
complete a chapter 13 case) or May 2013 (chapter 7). 	Making
matters worse is that the first mortgage is an adjustable rate
note. 	Pl ex 12. 	Although the rate was locked in at 5.9% for the
first two years, beginning in June 2006 it may increase or
decrease by as much as 1.5% every six months, with a floor of
5.9% and a ceiling of 12.9%.
Following the execution of the MSA, Debtor made the monthly
payments on the original second mortgage, albeit not consistently
on time. 	When Plaintiff refinanced the house and Debtor executed
the note, his monthly payment decreased from over $800 to $560.
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4 The Court notes that Debtor has listed “camera/pistol” in
response to question 8 of his amended Schedule B. 	Presumably
these are two different items, although with the proliferation of
cell phone cameras, cell phone music players (recently introduced
by Apple), multifunctional Blackberrys, Treos, and PDAs, etc.,
the introduction of a “camera/pistol” would not be altogether
surprising.
Page 9 of 	23
Plaintiff testified that Debtor was grateful for the lower
payment amount, and for a number of months paid those lower
monthly payments, until Plaintiff filed her bankruptcy petition.
It is the debt represented by the promissory note that
Plaintiff seeks to have held nondischargeable. 	Debtor argues
that this is not the same debt as he agreed to pay in the MSA.
Plaintiff asserts that this is the replacement debt (the original
not having been paid by Debtor but rather refinanced by her) for
which the MSA makes him liable. 	Plaintiff argued this debt
effectively constitutes alimony to her (§523(a)(5)) or that he
can pay the debt and it would be more harmful to her for him not
to pay the debt (§523(a)(15)). 	Debtor disputes these assertions.
Analysis
The complaint seeks relief in part for violations of
§727(a), based largely on Debtor’s initial schedules 4 which
purported to list his Los Lunas home as only half owned by
himself. 	Plaintiff claimed that Debtor was fraudulently claiming
that Plaintiff was the other half owner. 	It is true that the
initial schedules were somewhat defective in explaining the
background that the amendments to the schedules and the Debtor’s
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testimony have clarified: Debtor is purchasing his home on a real
estate contract (Pl Ex 9) and therefore has no fee simple
interest yet, and anticipated that if and when he married his
fiancee, whose income is also directly or indirectly contributing
to the payments on the real estate contract, she would be a half
owner of the interest in the property. 	There was clearly no
fraudulent intent on the part of the Debtor, merely an initially
inept expression of what was intended which was no fault of the
Debtor.
Plaintiff also claims that the second mortgage debt is
nondischargeable under either subsections (5) or (15) of §523.
Debtor’s initial argument, that the refinancing of the
Homecomings mortgage discharged his obligation to pay the second
mortgage replacement note, borders on the absurd, and Debtor’s
making the argument damages his credibility. 	While it is true
that the MSA specifically identifies the Homecomings mortgage as
the debt to be paid, the MSA was not crafted by high-powered
attorneys keen to anticipate every possible contingency in the
parties’ post divorce financial and emotional lives. 	(In fact,
it was largely drafted by Debtor, perhaps with the help of a non-
lawyer.) 	In consequence, the short and plain statement of the
parties’ agreement that is the MSA is best read in light of the
parties’s intentions, one of which was to divide the debts and
assets equally. 	Shifting this debt to Plaintiff would have
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5 And it is inconsistent with the amount of the debt that
was incurred. 	Plaintiff testified credibly that she had not
wanted to borrow up to $75,000, but that Debtor wanted to fix up
his rental properties and so the final $25,000 that was borrowed
went entirely to him for that purpose. 	Although equal
distribution of debts and assets was the governing principle
behind the allocations of the MSA, it would be somewhat
incongruous were Debtor to have gotten the money for his rentals
and then left her in the end saddled with repayment of that part
of the debt. 	However, this incongruity is not a reason for
declaring the debt nondischargeable.
Page 11 of 	23
radically unbalanced the parties’ arrangement. 	Debtor’s actions
afterward support this interpretation of the parties’ mutual
intention; he continued to make the payments on the note until
she filed her bankruptcy petition. 	In fact he was duly
appreciative of the reduced payments. 	His statement that he
signed the note merely to “satisfy the argument” between the two
of them is equally not credible. 5
Plaintiff claims that payment of the second mortgage note in
effect constituted alimony or spousal support. 	The MSA
explicitly states that neither party is paying alimony. 	Such a
statement in the MSA is not conclusive on the subject, Sampson v.
Sampson (In re Sampson), 997 F.2d 717, 722 (10 th Cir.
1993)(section 523(a)(5) requires federal courts to look beyond
the label which the parties attach to an obligation), but it is
evidence of what the parties were thinking and intending at the
time. 	A payment denominated as something other than support can
be treated as support if the parties intended at the time for the
payment to serve as support, and if they actually treated the
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payments as support when they were made. 	Id. at 723. 	Neither of
those criteria are met here. 	Neither party testified that the
payments were intended as support by the parties at the time of
executing the MSA, nor that they subsequently treated the
payments that way. 	Indeed, Plaintiff candidly testified that
both parties intended the MSA to divide the assets and
liabilities as evenly as possible between them. 	There is thus no
evidentiary basis for refusing to discharge the debt pursuant to
§523(a)(5).
The outcome of the analysis under §523(a)(15) is less
obvious. 	That subsection provided at the relevant time as
follows:
A discharge under section 727...does not discharge an
individual debtor for any debt...to a spouse, former
spouse, or child of the debtor and not of the kind
described in paragraph (5) that is incurred by the
debtor in the course of a divorce or separation or in
connection with a separation agreement, divorce decree
or other order of a court of record...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 the maintenance
of support of the debtor or a dependent of the debtor
and, if the debtor is engaged in a business, for the
payment of expenditures necessary for the continuation,
preservation, and operation of such business; or
(B) discharging such debt would result in a benefit to
the debtor that outweighs the detrimental consequences
to a spouse, former spouse, or child of the debtor....
Plaintiff (creditor) bears the burden of coming forward with
evidence that the debt in question arises from an MSA and
therefore fits within §523(a)(15). 	See §523(c)(1) (creditor must
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6 Because the Court finds that neither condition or set of
circumstances of §523(a)(15) justifies holding the debt
nondischargeable, the Court does not need to decide whether a
finding that the Debtor cannot pay the debt precludes the need to
consider the balance of harm test. 	However, separating
subsections A and B with an “or” rather than an “and” suggests
that meeting the requirements of either subsection A or
subsection B is sufficient to end the inquiry. 	The legislative
history, quoted below, seems to provide further support for this
interpretation.
Page 13 of 	23
initiate nondischargeability action); 4 A. Resnick and H. Sommer,
Collier on Bankruptcy (15 th Ed. Rev. 2006) ¶523.21[2]. 	“The
burden of proof then shifts to the debtor to establish that the
debt is dischargeable because the conditions set forth in either
subparagraph (A) or subparagraph (B) exist.” 	Id. 	(Footnotes
omitted.)
Subsection (A) permits the debt to be discharged if the
debtor does not have the ability to pay. 6 	“[I]n considering the
debtor’s income, the court should take into account, not only the
debtor’s current income, but also the debtor’s income earning
ability and potential future income.” 	Id., ¶523.21[3].
(Footnote omitted.)
To begin with, Debtor has some credibility problems on this
front also. 	He falsified his 2003 and 2004 IRS returns (Pl Exs
22 and 23) by failing to list income. 	So the question arises
whether his Schedules I and J are accurate. 	His Schedule I now
shows monthly income of $1425 from his handyman business plus
$750 from his live-in fiancee, for a monthly total of $2,175.
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Page 14 of 	23
His Schedule J shows expenses of $3635, for a net monthly loss of
$1460. 	However, based on the evidence presented, the Court
cannot find that any amounts of underreported income are likely
very substantial. 	A yearly income of $17,000 ($1,425 x 12) is
much more credible than $2,179. 	Plaintiff presented no
additional evidence that suggested Debtor materially falsified
his Schedules I and J. 	As a result, the conclusions reached by
the Court are based on the finding that Debtor’s current income
is sufficiently accurately stated in his Schedule I.
In addition, there was no evidence that Debtor could, if he
wanted, increase his income so substantially that he could put
his budget into the black. 	For example, Debtor’s explanation
that he was having some conflicts with his superiors that led to
his leaving Home Depot tells this Court (in the context of the
rest of the testimony) that going back to Home Depot, especially
in a higher paying position, is out of the question. 	And while
the Debtor gave as his reason for not wanting to return to Home
Depot his intention to obtain a general contractor license, there
is no evidence that Debtor is actually on his way to doing that.
Similarly, a review of his amended Schedules A and B discloses no
additional non-exempt assets, the liquidation of which would
materially aid Plaintiff. 	As with the majority of chapter 7
filers in this district, Debtor has relatively few assets,
regardless of whether they are exempt or not.
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7 It is not clear where this figure comes from. 	The
promissory note payment is $560.
Page 15 of 	23
For the most part, Debtor’s expenses do not seem to be
inappropriately high. 	The $200 for “pet care” is high, unless
the “pets” are generating some income or otherwise performing
some useful function for the family. 	On the other hand, the $200
is relatively small compared to the total of the other expenses,
and reducing it to a reasonable figure would still not
meaningfully change the monthly financial picture for Debtor and
his fiancee. 	Nevertheless, the Court will subtract the $200 from
the expense figures of Schedule J, leaving $3,435.
Schedule J includes a “payment to ex-wife” of $532. 7 	But
because Debtor is not making this payment, the monthly expenses
for him and his fiancee should be listed as $2,903, or about
$35,000 yearly. 	So even without making the payment on the
replacement note, Debtor is underwater each month by $728 ($3,636
- $200 - $532 - $2,175 [income]). 	Plaintiff presented no
specific evidence that these figures were false (as opposed to
the false IRS returns for 2003 and 2004). 	In consequence, while
Debtor’s credibility is questionable, there is no concrete basis
for finding that Debtor has significantly more resources for
paying the debt than he has disclosed. 	The statute does not
permit the Court to in effect reallocate (that is, hold
nondischargeable) the debt based on lack of credibility as such.
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8 As is apparent from reading this opinion, the Court has
assumed that Plaintiff’s previous counsel, who signed off on the
reaffirmation agreements, did not counsel Plaintiff against
entering into them. 	It is possible he did so but ultimately
acceded to Plaintiff’s wishes. 	Other counsel, faced with a
debtor client who has insisted on entering into a reaffirmation
agreement against the advice of counsel, have refused to approve
the reaffirmation agreement and instead have arranged for a
hearing at which counsel and the debtor have appeared and which
the Court has conducted as if the debtor were not represented by
counsel.
Page 16 of 	23
Plaintiff testified that when Debtor was still making these
payments, which would have been prior to her having filed her
petition, she used the funds (at least occasionally) to pay bills
and expenses other than the second mortgage. 	To the extent that
Plaintiff is arguing that she needs to be able to continue to do
that, she is essentially arguing that the note payments should be
treated as spousal support. 	Given what has been said so far,
that argument is unavailing. 	Therefore the Court finds that as
to subsection A of §523(a)(15), the debt is dischargeable.
Determining the outcome of the balancing test of subsection
B is more difficult. 	Debtor clearly needs a fresh start;
Plaintiff just as clearly is in dire financial straits. 	This is
a case where there is simply much more debt than either party, or
even the parties together, can pay. 	The one good solution has
been eliminated by the reaffirmation agreements 8 ; what remains
now is merely to, in a sense, allocate responsibility for bearing
the burden of paying the second mortgage. 	To be sure, declaring
the debt nondischargeable will not of itself solve Plaintiff’s
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Page 17 of 	23
problem with the second mortgage; she will continue to be liable
on it regardless of what the Court does. 	Nor will it necessarily
result in a penny of actual additional income to her. 	Only if
she is able to use a nondischargeability judgment to pry payments
out of Debtor, will Plaintiff derive any financial benefit from
the statute.
The balance of harm test promulgated by the statute provides
only a general standard. 	Fortunately, some guidance for applying
the balance of harm test enunciated in subsection B appears in
the legislative history:
“The nondebtor spouse may be saddled with substantial
debt and little or no alimony or support. 	This
subsection will make such obligations nondischargeable
in cases where the debtor has the ability to pay them
and the detriment to the nondebtor spouse from their
nonpayment outweighs the benefit to the debtor of
discharging such debts. 	In other words, the debt will
remain dischargeable if paying the debt would reduce
the debtor’s income below that necessary for the
support of the debtor and the debtor’s dependents....
The debt will also be discharged if the benefit to the
debtor of discharging it outweighs the harm to the
obligee. 	For example, if a nondebtor spouse would
suffer little detriment from the debtor’s nonpayment of
an obligation required to be paid under a hold harmless
agreement (perhaps because it could not be collected
from the nondebtor spouse or because the nondebtor
spouse could easily pay it) the obligation would be
discharged. 	The benefits of the debtor’s discharge
should be sacrificed only if there would be substantial
detriment to the nondebtor spouse that outweighs the
debtor’s need for a fresh start.”
H.Rep. No. 103-835, 103 rd Cong., 2 nd Sess. 54, reprinted in 1994
U.S. Code Cong. & Admin. News 3363; also reprinted in Colliers
¶523.21[1] at page 523-120.
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9 This case is typical of chapter 7 cases with “deficit
budgets”. 	That is, a remarkably large number of debtors file a
chapter 7 bankruptcy case and then, judging by their Schedules I
and J, continue to spend more each month than they earn.
Page 18 of 	23
What the last sentence of the quoted legislative history
suggests is that, even with Debtor having the burden of proof on
this part of the statute, the debt should be discharged unless
there is a particularly good reason not to. 	On the other hand,
the language of the statute -- specifically subsection B of
§523(a)(15) -- clearly evidences Congress’ intention to protect
non-filing (ex)spouses. 	That would suggest that there not be a
presumption of dischargeability. 	In this instance, and without
deciding the issue, the Court has not relied on any presumption
of or disposition toward dischargeability to reach its
conclusions.
Whether Debtor will be able to benefit from his fresh start
given his monthly budget deficit is already questionable. 9 	But
what is clear is that requiring Debtor to pay an additional $560
per month, thereby in theory at least increasing his budget
deficit from $728 to $1288, will make his fresh start much more
difficult, if not impossible, to realize. 	Not driving Debtor
deeper into debt is certainly a factor weighing in favor of
discharging the debt.
Plaintiff’s amended schedule J (doc 15), filed September 15,
2005, shows total expenses of $3,477, of which $1,916 is for the
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10 Of course, Debtor was not expected to assume that Debtor
would file his own bankruptcy petition, only that he could or
might. 	That is, Plaintiff’s then bankruptcy counsel might be
expected to anticipate this possibility and counsel Plaintiff
accordingly.
Page 19 of 	23
first and second mortgages. 	The non-mortgage expenses of $1,561
are individually and in aggregate quite reasonable. 	Were
Plaintiff to sell her home, she would still need a place to stay.
Even adding back into the non-mortgage figures a reasonable
number for rent – say, $800 – puts budgeted expenditures at
$2,361. 	This compares quite reasonably with the $2,903 that
Debtor and his fiancee will be incurring. 	The additional $1,116
($3,477 - $2,361) representing the cost of attempting to hold on
to the Westridge house would be, but for the reaffirmation
agreements, an extra expense that reasonably should not be
Debtor’s postpetition liability.
The facts of this controversy raise the question of whether
Debtor should be held responsible if Plaintiff has decided to
embark on such a perilous and perhaps futile attempt to save her
home. 	With the filing of her petition, Plaintiff had a specific
opportunity to consider all the facts and make a decision whether
to continue to be liable on those two debts. 	Debtor had nothing
to do with that decision; by that time the parties had been long
separated and making decisions based on their own interests.
Plaintiff had no basis for assuming that, if Debtor were to file
a bankruptcy petition of his own 10 , he would be found liable for
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helping to pay this debt. 	Debtor’s prepetition payment
obligation clearly was not spousal support, and whether the
circumstances would turn out that he could afford to make the
payment could not be known. 	That Debtor ceased making the note
payments shortly before or when Plaintiff filed her petition
might have been a tipoff that collecting from Debtor would be
difficult.
These circumstances bring to mind what might be the
bankruptcy equivalent of the “eggshell-head rule”. 	See Black’s
Law Dictionary at 533 (7 th Ed. 1999); Martin v. Darwin, 77 N.M.
200, 202, 420 P.2d 782, 784 (1966) (“Where plaintiff has a pre-
existing condition and claims that defendant aggravated that
condition, plaintiff must prove the extent of that
aggravation.”); 2 Restatement (Second) of Torts §461 (1965) (Harm
Increased in Extent by Other’s Unforeseeable Physical Condition);
D. Dobbs, The Law of Torts §188 at 464 (2001) (“The
foreseeability or risk rule holds the defendant subject to
liability if he could reasonably foresee the nature of the harm
done, even if the total amount of harm turned out to be quite
unforeseeably large.”) (Footnote omitted.). 	In other words,
should Debtor be held liable for the Plaintiff in the financial
and legal situation she was when he filed his own bankruptcy
petition?
Under the facts of this case, the Court thinks not. 	The
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Code’s philosophy of looking at the Debtor’s ability to pay and
of balancing the harm between the parties, enunciated in
§523(a)(15), is fundamentally different than the resulting
assessment of liability on a person found liable for causing a
tort. 	Compare F. Harper, F. James and O. Gray, The Law of Torts
§20.3 at 128-29 (2 nd Ed. 1986) (discussing “the modern trend to
emphasize compensation of accident victims and broad distribution
of their losses rather than a more nearly perfect tracing out of
the implications of the fault principle” in the context of
multiple tortfeasors) (Footnote omitted.) 	When assessing
liability, tort law does not look to the ability of the
tortfeasor to pay the resulting damages. 	On the other hand, that
ability to pay is in many ways the very subject of bankruptcy
law.
In addition, it makes sense to require a debtor (Plaintiff,
this instance) to take into account the consequences on other
persons of her decisions when she files a petition. 	No doubt
non-filers have the obligation to look out for their own
interests. 	But if a debtor wants to ensure that a non-filer
continues to be liable on a claim, the debtor needs to consider
whether the non-filer will be held liable, and anticipate the
possibility that he will not. 	And part of that consideration
will be whether it makes sense to reobligate herself on the
claim. 	In short, and unlike the eggshell-head tort victim,
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Plaintiff in her case had a considerable amount of control over
the outcome of her liability on the second-mortgage claim and
therefore on her need to obtain an additional means of paying the
claim. 	With Plaintiff having that degree of control, requiring
Debtor to “take the Plaintiff as he finds her” would only deflect
the consequences of an unwise decision on to the person who did
not make (and was in no position to influence) the unwise
decision.
In consequence, Debtor should not in effect be held liable
for the adverse consequences of Plaintiff’s decision to continue
to be liable on the mortgage debts. 	This conclusion applies even
in light of Plaintiff’s testimony that she used the note payments
for living expenses rather than applying them to the payment of
the second mortgage. 	Therefore the Court finds that as to
subsection B of §523(a)(15), the debt is dischargeable.
Conclusion
The MSA was clearly intended to divide assets and
liabilities rather than serve as support for Plaintiff. 	Debtor
cannot afford to pay the second mortgage replacement note.
Holding that note nondischargeable as to Debtor would serve no
useful purpose for Plaintiff unless she were able to actually
collect on it; if she were able to squeeze some payment from the
Debtor, that collection (or, for that matter, the mere continuing
obligation) would obviously impair Debtor’s fresh start. 	In any
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event, he should not be saddled with the consequences of her
decision to remain liable on the mortgages. 	The Court finds that
Plaintiff has not established the factual predicates for relief
under §§727(a) and 523(a)(5) and (15). 	The complaint must
therefore be dismissed. 	An order will be entered.
James S. Starzynski
United States Bankruptcy Judge
COPY TO:
James Clay Hume
PO Box 10627
Alameda, NM 87184-0627
Michael K Daniels
PO Box 1640
Albuquerque, NM 87103-1640
Philip J. Montoya
Trustee
PO Box 159
Albuquerque, NM 87103
United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
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