In Re: Levenstein

Background

Lance Levenstein appealed a July 26, 2022, order of the U.S. Bankruptcy Court for the Southern District of New York. That order granted summary judgment to Piyanate Manewan and declared that Levenstein’s debt to her was not dischargeable under 11 U.S.C. § 523(a)(15). Summary judgment is a decision without a trial when the court determines that the relevant facts do not require a trial.

Between October 1992 and June 1995, Levenstein failed to make child-support payments to his former wife, Kimberly David. After Levenstein pleaded guilty in a federal criminal case, a June 27, 1995, amended judgment required him to pay David $132,718.49 in restitution. Levenstein later used marital funds from his marriage to Manewan to pay that judgment.

Manewan filed for divorce in 2006, alleging that Levenstein had committed bigamy because he had not divorced his second wife before marrying Manewan. In 2009, the state Divorce Court issued an annulment judgment and directed distribution of the couple’s marital debts and assets. After Manewan appealed, the Appellate Division, Second Department ruled in her favor and sent the matter back for an amended judgment.

The Divorce Court then entered a judgment awarding Manewan $86,377.50, including $79,050 representing her credit for marital funds used to pay Levenstein’s child-support judgment. The judgment was later entered against Levenstein for $93,997.52, including interest and costs.

Levenstein filed his third bankruptcy petition under Chapter 7 in 2017 and received an order of discharge in 2018. Manewan later moved to reopen that bankruptcy case, stating that she had not received proper notice because her address was listed incorrectly. The Bankruptcy Court reopened the case, and Manewan filed a separate adversary complaint seeking a determination that the matrimonial judgment was not discharged.

Issue and arguments

The issue was whether the debt represented by the matrimonial judgment was excepted from discharge under Section 523(a)(15). Levenstein argued that the debt was a money judgment, rather than a debt covered by Section 523(a), and therefore had been discharged in his third bankruptcy case.

Levenstein also argued that treating the debt as non-dischargeable was unfair because it required him to pay the same obligation twice. He relied on an out-of-circuit case involving a dischargeability question concerning an arbitration award arising from non-matrimonial state-law claims.

Legal standard

The district court reviewed the Bankruptcy Court’s legal conclusions independently and reviewed its factual findings for clear error. Section 523(a)(15) prevents discharge of a debt that is owed to a spouse, former spouse, or child; is not a domestic support obligation under Section 523(a)(5); and was incurred during a divorce or separation or in connection with a separation agreement, divorce decree, or other court order.

The court explained that Section 523(a)(15) is broader than Section 523(a)(5), which covers domestic support obligations such as alimony, maintenance, or support. In a Chapter 7 case, the court stated, both domestic-support debts and other debts arising from a marital relationship can be non-dischargeable under the applicable exceptions.

Court’s analysis

The court held that the matrimonial judgment met all three requirements of Section 523(a)(15). First, the debt was owed to Manewan, a former spouse. Second, the debt represented a credit for marital funds used to pay a criminal judgment against Levenstein, so it was not in the nature of maintenance, alimony, or support and therefore was not a domestic support obligation under Section 523(a)(5). Third, the debt arose from the Divorce Court’s matrimonial judgment issued in connection with the annulment and distribution of marital assets and debts.

The court found Levenstein’s reliance on the out-of-circuit case misplaced. That case involved a former relationship and an arbitration award based on non-matrimonial state-law claims, and it did not address Section 523(a)(15). Here, Manewan was a former spouse and received the judgment through a post-annulment distribution of marital assets and debts.

The court also rejected Levenstein’s argument that the judgments created duplicate payment obligations. It stated that the child-support judgment and the matrimonial judgment addressed different aspects of Levenstein’s failure to pay the full amount owed to David. The court further concluded that Levenstein had not shown any factual or legal error in the Bankruptcy Court’s decision.

Disposition

The district court affirmed the Bankruptcy Court’s July 26, 2022, order. The clerk was instructed to close the case.