Slide 1Daniel Bell
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• Understand how Bankruptcy impacts a child
support case and which enforcement actions are
permissible
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• A specialized area containing potential pitfalls for
the uninformed and unwary
types of debt and give the debtor a fresh start
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provide a procedure by which certain insolvent debtors
can reorder their affairs, make peace with their creditors,
and enjoy 'a new opportunity’ in life with a clear field
for future effort, unhampered by the pressure and
discouragement of preexisting debt.” (Grogan v. Garner
(1991) 111 S.Ct. 654, 659.)
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Bankruptcy Overview
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Ch. 9
• Debtor must be a municipality •Special filing- not available to individuals or companies
Ch. 12
• Debtor must be a family farmer •Special filing- not available to most individuals or companies
Ch. 11
• Debtor’s debt exceeds limit of Chapter 13 or lacks regular income •Available to individuals or companies but is most used by Businesses
Ch. 13
• Involved a payment plan from disposable income •Available to individuals
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Bankruptcy Petition Bankruptcy Schedules: When Petition is filed, Debtor must also file
all required schedules. 11 U.S.C.§521.
Real PropertySchedule A
Personal PropertySchedule B
Exemptions*Schedule C
Secured ClaimsSchedule D
Executory ContractsSchedule G:
Co-DebtorsSchedule H:
IncomeSchedule I:
ExpensesSchedule J:
Details of debtor’s personal matters so that the court can fully grasp the financial situation
Statement of Financial Affairs
test
filed 4 mo.Final Discharge
• 11 U.S.C. §§701-784 • Discharge usually takes place 4 months post filing. • LCSA may file a Proof of Claim if there are assets.
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- Liquidation
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plan
Chapter 11 bankruptcy?
The Obligor should file a Proof of Claim with the
Bankruptcy Court.
Generally, LCSA does not get involved. Do not
cash company checks.
• There are VERY FEW Ch. 12 petitions filed.
• Income requirement: 50% of debtor’s annual income must be from fishing or
farming.
• They are only slightly different from a Chapter 13 because the plan payments
are organized seasonally based on crop and herd cycles.
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• Do not pass means test
• Unsecured: $419,275
• Secured: 1,257,850
Meeting of Creditors (341)
• Creditors can attend and ask questions
1st plan payment is due
•Approximately 30-45 days after filing
Trustee Review of Plan
•Sometimes amendments are made
•No= case is dismissed.
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Support?
Debtor
LCSA Attorney
• Review Plan
• Receive payments outside of plan or via IWO
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of DSO
In re Warren, 89 B.R. 87 (9th
Cir.BAP 1988).
11 U.S.C. § 1325(a)(7)
filing of bankruptcy
11 U.S.C. § 1325(a)(8)
• 11 U.S.C. § 101(14A)
• Defined as “a debt that accrues before, on, or after the date of the order for relief . . . including interest that accrues on that debt as provided under applicable non- bankruptcy law.”
• A spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible relative; or
• A governmental unit
• Means money owed directly to government
• May be less than full payment if all disposable income for 60 months is pledged
• 11 U.S.C. §1322 (a)(4)
Mixed Accounts
• Money owed to PRS must be paid in full through Plan
• Assigned money can receive less than full payment
• In re Penaran (Bankr. D. Kan.) 424 B.R. 868.
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• Chapter 7: if there will be assets
and/or trustee requests
• Child Support is NON- DISCHARGEABLE priority claim.
Proof of Claim form Support Calculation Copy of Judgment Supporting the
claim
Local rules refer to a particular set of rules for
each court. Local rules reflect the courts'
traditional authority to manage their own affairs
to achieve the orderly and expeditious
disposition of cases.
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Bankruptcy Overview
Automatic Stay
debt
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Bankruptcy Overview
Criminal Actions
Establishing Parentage
Spousal Support
Exceptions to Automatic Stay
IWO for Current Support Credit Reporting Suspend Licenses Intercept tax refunds
Permissible Enforcement Actions
Property of the Bankruptcy Estate
Once a Petition for Bankruptcy is filed, a Bankruptcy Estate is created.
Defined as: “All legal or equitable interests of the debtor in property at the time of the bankruptcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)”
All assets and debts Tax refunds Lottery proceeds All sources of income*
(Ch. 13 earnings part of estate (11 U.S.C. §1306). Exception for Ch. 7 income
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Bankruptcy Overview
•Enforcement activities may resume
•Why is it dismissed?
•Pre-confirmation: plan isn’t feasible, or the petition did not have appropriate schedules
•Post-confirmation: Failure to make plan payments.
•Motion to Dismiss: (“[T]he court may ... dismiss a case under this chapter ... for cause, including ... (11) failure of the debtor to pay any domestic support obligation that first becomes payable after the date of the filing of the petition.”); 11 U.S.C. § 1328(a).
Discharge •File completed petition and schedules
•Confirmed Plan
•Successful performance under the plan
•Result: Debtor’s obligation to pay certain pre-petition debts no longer exists
•Unsecured Debt: all unsecured debt which existed when debtor filed bankruptcy are eliminated via performance under the plan
•Secured Debt: Discharge generally does not apply to secured debt (e.g. mortgage/car loan), criminal fines, restitution resulting from willful or malicious injury, and never applies to Domestic Support Obligations
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Bankruptcy Overview
Appearance of Child Support Creditor
P.L. 103-394, §304(g) –uncodified statute
Child support creditors or their representatives shall be permitted to appear and intervene without charge, and without meeting any special local court rule requirement for attorney appearances, in any bankruptcy case or proceeding in any bankruptcy court or district court of the United States if such creditors or representatives file a form in such court that contains information detailing the child support debt, its status, and other characteristics. (FS-B-281)
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Bankruptcy Overview
Wage Assignment
Tax Intercept
Contempt Actions
Enforcement Actions Passport Restriction
DCSS may submit a passport denial request to Department of State after a bankruptcy has been filed.
• Passport is NOT property of the debtor
• Passport is the property of the United States Government (22 C.F.R. 51.7)
• Since passport is not property of debtor, it cannot become property of the BK estate, and therefore, is not subject to the automatic stay (see OCSE PIQ-07-04)
• United States Government may not issue passport if applicant owes child support arrears. (22 C.F.R. 51.60)
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Enforcement Actions Child Support Warning Notice
Child Support Agencies should not be sending a Child Support Warning Notice after a bankruptcy has been filed.
FORM: (FS-ENF-136) Although items listed on the
Child Support Warning notice may be permissible.
However, courts have held that collection letters that are broad in scope and threaten
to take action violate the spirit of the statute. (In re
Diaz (2009, Bankr. M.D. Fla.) 452 B.R. 257, 274.)
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• Form: FS-ENF-140
CSE.
arrears.
include a provision regarding
suppress BCSWN.
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Enforcement Actions
Income Withholding Order
Automatic Stay does not apply: “to the withholding of income that is
property of the estate or property of the debtor for payment of a
domestic support obligation under a judicial or administrative order or a
statute.” 11 U.S.C. 362(b)(2)(C).
• Chapter 7: Wage assignment can remain in place for current support and
arrears. 11 U.S.C. 541§(a)(6). *Even though post petition earnings are not
property of the estate.
• Chapter 13: Wage assignments are permissible; check to ensure they don’t
violate the terms of the Confirmed Plan because the Plan may already
provide payment of arrears.
• May need to amend IWO.
• May agree to receive payments outside of the Plan • Ensure the agreement is reflected in the plan and amend Proof of Claim
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Enforcement Actions
Tax Intercepts
The Automatic Stay does not apply: “to the interception of a tax refund, as specified in sections 464 and 466(a)(3) of the Social Security Act or under analogous State law.” (11 U.S.C. 362(b)(2)(F).)
• Chapter 7: Tax interception is permissible.
• Chapter 13: Tax interception is permissible. However, the confirmation of a Chapter 13 complicates matters.
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Enforcement Actions
Tax Intercepts- Chapter 13
11 U.S.C. 1327, subdivision (a): “The provisions of a confirmed plan bind the debtor and each creditor, whether or not the
claim of such creditor is provided for by the plan, and whether or not such creditor has objected
to, has accepted, or has rejected the plan.”
If the Plan contains a provision regarding tax refunds, i.e., that
such funds will be applied to plan payments, interception of such funds for child support would violate the terms of the Plan.
Therefore, if the Plan expressly provides for distribution, LCSA
should suppress.
Plan is silent: if a Chapter 13 Plan is silent on the issue of the
Debtor’s tax refund, LCSAs may continue with interception of such funds. In re McGrahan
(2011, B.A.P) 459 B.R. 869, 875
In 2016, In re Gonzalez (2016) 832 F.3d 121 created a circuit split between the
1st and 11th circuits.
Due to Gonzalez, and out of an abundance of caution, it
may be a best practice to suppress tax intercepts if the Plan is silent on the issue of
the Debtor’s tax refund.
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Model Plan
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Enforcement Actions Suspension of Driver and Occupational Licenses
The stay does not apply to “the withholding, suspension, or restriction of a driver license, a professional or occupational license, or a recreational license under state law […].” 11 U.S.C. section 362(b)(2)(D)
Chapter 7 • Permissible
suppression
Bankruptcy courts have held that a debtor’s driver license is “necessary and appropriate to carry
out the provisions of the Bankruptcy Code and to further the implementation of the Debtor’s
confirmed Plan.” (See In re Cobb (2010, Bankr. D. Kan.) not a published opinion.
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Enforcement Actions
Civil Contempt
Violates the stay. Civil Contempt violates the stay. In re Bible (1990, Bankr. S.D. Ga.) 110 B.R. 1002; In re Allison (1995, Bankr.
N.D. Ala.) 182 B.R. 881
Does not violate the stay, so long as they collect only from non-estate property. In re
Johnston (2005, Bankr. D. Ariz.) 321 B.R. 262, 279.)
Civil Contempt violates the stay if they can be characterized as “coercive” and does not violate the stay if contempt can be characterized as “punitive.” In re Dingley (2014, B.A.P. 9th Cir); In re Lowery (2003, E.D. Mo.) 292 B.R. 645; In re Stovall (1990, Bankr. N.D. Ga.) 126 B.R. 814.; In re Rook (1989, Bankr. E.D. Va.); Sommer & MgGarity, Collier Family Law and Bankruptcy Code (2014)
Criminal Contempt
commencement or continuation of a criminal
action or proceeding against the debtor…”
Area of Law is not clear. No controlling authority.
Out of an abundance of caution, LCSAs should not proceed with a civil contempt during the duration of Bankruptcy.
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Enforcement Actions
Real Property Liens
(1) Court determines the Abstract Judgment under CCP 697.340 attaches “only to the extent of
the judgment debtor’s interest in property;”
(2) The Court finds that at the time a debtor files a bankruptcy
petition, all the debtor’s real property becomes property of
the estate; and
(3) the Court concludes that since the abstract attached only to the property of the debtor (and not
the estate), and the debtor holds no interest in the real property after the filing of the petition, real property lien can’t attach. Therefore, the recording of the
abstract cannot violate the automatic stay.
Recording of real property lien in California does not violate the automatic stay. However, execution of the lien would probably result in a violation.
In re Cady (Bankr. 9th Cir. 2001) 266 B.R. 172
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Court Records/PACER
• Public Access to Court Electronic Records (PACER)
www.pacer.gov
Rule 5005 (2) Electronic filing and signing (A) By a Represented Entity--Generally Required; Exceptions. An entity represented by an attorney shall file electronically, unless nonelectronic filing is allowed by the court for good cause or is allowed or required by local rule.
Nicole.Caldera@hss.subcounty.gov