A Confirmed Bankruptcy Plan is Final as to Domestic Support Obligations

The Bankruptcy Code, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), provides an exception to the automatic stay, which generally prohibits collection activity against property of the estate, for “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 statute.”  In Florida Dept. of Rev. v. Gonzalez (In re: Gonzalez), ___ F.3d ___, 2016 WL 4245422 (11th Cir. Aug. 11, 2016), the Eleventh Circuit held that there is no similar exception to a confirmed bankruptcy plan.

Gonzalez petitioned for relief under Chapter 13 of the Bankruptcy Code and the bankruptcy court ultimately confirmed a plan which included provision for full payment of arrearages on Gonzalez’s child support obligations, payable to the Florida Department of Revenue.  But the plan said nothing about interception of payments to Gonzalez by the DOR.  Nevertheless, after confirmation, the DOR intercepted a reimbursement payment to Gonzalez from his employer.  Gonzalez moved to hold the DOR in contempt for violating the confirmed plan; the bankruptcy court granted the motion, and the district court affirmed.  On appeal to the Eleventh Circuit, the DOR argued that the BAPCPA’s legislative history supported an exception for domestic support obligations not only to the automatic stay, but also to a confirmed plan.  The Eleventh Circuit disagreed, based on the “clear language of s. 1327(a) [of the Bankruptcy Code] that binds all creditors to the plan”:  “The legislative intent behind s. 362(b)(2)(C), which permits a DSO creditor to collect notwithstanding the automatic stay, does not indicate that Congress intended the exception to interfere with the binding effect [of] a confirmed plan per s. 1327(a).  As such, although the DOR did not violate the automatic stay when it intercepted Gonzalez’s reimbursement payment, it did violate the confirmed plan.”

Posted by Valerie Sanders

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