Subsection (15) of Section 523(a) was added to the Bankruptcy Code in the Bankruptcy Reform Act of 1994 to expand the Section 523(a)(5) exception to discharge for marital debts.  Section 523(a)(15) provides that an individual is not discharged from any debt

(15) 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, a determination made in accordance with State or territorial law by a governmental unit 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 or 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.

Basically, subsection (15) makes nondischargeable all divorce-related debts other than alimony, maintenance, and child support, which are already nondischargeable pursuant to 523(a)(5).

Section 523(a)(15) was analyzed in detail in the case In Re Crosswhite, 148 F.3d 879.  In that case, it was undisputed that the debts  sought to be discharged were divorce-related debts.  The key issues focused on the “exceptions to the exception” found in 523(a)(15)(A) and 523(a)(15)(B) and the relative burdens allocated to the parties.

The Court found that the initial burden under both exceptions – the “ability to pay” test under 523(a)(15)(A) as well as the “detriment” test under 523(a)(15)(B) – belonged to the creditor.  The creditor bears the burden of proving that the claim against the debtor falls within 523(a)(15).

Once such a showing is made, however, the burden shifts back to the debtor to  demonstrate satisfaction of one of the two exceptions to the exception.  In that case, the 7th Circuit found that the lower courts had failed to properly allocate the burden of proving the exceptions to the exception on the Debtor, and therefore remanded the case for further fact inquiry consistent with that analysis.

In making such analysis, the 7th Circuit stated that the proper analysis was a “totality of the circumstances” test.  In that case, the analysis involved looking both at income of the ex-wife’s new husband, as well as the income of the debtor’s live-in girlfriend (or “spousal equivalent”, using the court’s term).