On appeal from the Superior Court of New Jersey, Chancery Division, Somerset County.
Matthews, Furman and Havey. The opinion of the court was delivered by Havey, J.A.D.
Defendant husband appeals from a determination by the trial court that his obligation under a consent provision of the Final Judgment of Divorce to make payments on a second mortgage which encumbered the former marital home is not dischargeable in bankruptcy. The issue is whether the obligation is in the nature of support or is part of the agreed disposition of the marital assets. The trial court concluded that the obligation was in the nature of support and consequently not dischargeable. We agree and affirm.
The parties were divorced on June 13, 1983. Their agreement, which was incorporated into the Judgment of Divorce, required defendant to pay plaintiff $30.00 per week for the support of each of the four minor children. Defendant agreed to convey his interest in the marital home to plaintiff, make two delinquent payments due on the first mortgage and pay one-half of the real estate taxes then due on the property. He also agreed to make the remaining $160 per month payments due on a note secured by a second mortgage on the marital home held by AVCO Finance Co. (AVCO), and to pay off joint marital debts owed to J.C. Penney, Visa and Gibus Fuel Company. The parties agreed that the AVCO mortgage would be paid in full from the proceeds of sale of the home if current at that time. Both parties waived alimony.
At issue here is payment of the AVCO mortgage. On September 8, 1983, AVCO instituted foreclosure proceedings because of default in the monthly payments. On October 14, 1983, defendant and his new wife filed a voluntary petition in bankruptcy, listing as debts the AVCO mortgage, having a then principal balance of $5,595.59, as well as the arrears owed for the first two mortgage payments and real estate taxes defendant had not yet paid. Plaintiff filed an enforcement motion in the Chancery Division on February 6, 1984 seeking a declaration that the first mortgage payment arrears and defendant's obligation to pay the AVCO mortgage were not dischargeable in bankruptcy and sought an order compelling defendant to make immediate payment of the delinquency to AVCO. The order granting plaintiff's relief, from which this appeal is taken, was entered on March 2, 1984.*fn1 On that same date an order of discharge of bankruptcy was entered in the United States Bankruptcy Court, District of New Jersey.
Defendant contends that his obligation to pay the AVCO second mortgage is dischargeable for three reasons: it is a debt owed to a third person and not to plaintiff; it is not designated as an alimony or support obligation, and it was intended to be part of the agreed distribution of the marital estate and not alimony or support. We reject each reason as being without merit.
The Bankruptcy Reform Act of 1978 prohibits the discharge of a debtor's alimony, maintenance or support obligations to his or her former spouse and children. 11 U.S.C.A. § 523(a)(5) provides in pertinent part as follows:
(a) A discharge under section 727, 1141 or 1328(b) of this title [11 USCA § 724, 1141, or 1328(b)] does not discharge an individual debtor from any debt --
(5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a
separation agreement, divorce decree, or property settlement agreement, but not to the extent that --
(A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise (other than debts assigned pursuant to section 402(a)(26) of the ...