Here's an interesting case where the USDC reversed the bankruptcy court regarding the dischargeability of debt owed not to debtor's "child," but owed to the attorney for the child in a divorce proceeding.
In Levin v. Greco (In re Greco), 415 B.R. 663 (N.D.IL 2009), the USDC held that debt owed to a “child representative” qualifies for the Section 523(a)(5) domestic support exception to discharge under the Bankruptcy Code since that debt resulted from a court-approved divorce action settlement for legal services rendered on behalf of debtor’s child.
Section 523(a)(5) provides that a debt “for a domestic support obligation” is not dischargeable in bankruptcy. The term “domestic support obligation” is defined in the Bankruptcy Code as debt that is owed to or recoverable by “a spouse, former spouse, or child of the debtor….” Section 101(14A).
The child representative admitted that he did not satisfy the technical requirements of subsection 14(A) since the debt was not owed to the “child,” but he argued that an exception should be recognized for child representatives to encourage future attorneys to serve as child representatives in divorce proceedings without fear of losing their fees.
The Levin court noted that the 7th Circuit has not yet addressed the issue, but the court recognized that the 7th Circuit has endorsed the notion that Section 523(a)(5) can except debts owed to third parties. Citing In re Rios, 901 F.2d 71, 72 (7th Cir. 1990)(“And awards of attorneys’ fees for services in obtaining support orders have been held nondischargeable even though the attorney is neither a spouse, a former spouse, nor a child of the debtor”).
The court acknowledged that the principal purpose of the Bankruptcy Code is to grant a fresh start in life and any exceptions to discharge are generally construed strictly against a creditor and liberally in favor of debtor. Notwithstanding, the court believed that the long standing policy of protecting spouses and children required a Section 523(a)(5) exception from discharge to be construed more liberally than other Section 523(a) exceptions.
Therefore, the Levin court expanded the scope of the term “child” as defined by Section 101(14A) as incorporated into the Section 523(a)(5) discharge analysis. Consequently, the court held that the debt owed to the child representative is not discharged by debtor’s bankruptcy.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
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For information about Chapter 7 bankruptcy Click Here
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You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Sunday, January 31, 2010
Friday, January 15, 2010
Automatic Stay
The "automatic stay" provisions of the US Bankruptcy Code comprise an integral part of the bankruptcy protection process.
The filing of a bankruptcy petition results in the immediate implementing of the automatic stay. No motion need be filed, and no order need be entered by any court. The automatic stay operates as a broad stay of most types of creditor activity, including “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate” and “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case.” Section 362(a)(3) and (5).
The automatic stay is one of the fundamental debtor protections provided by the Bankruptcy Code. It gives the debtor a breathing spell from his creditors; it stops all collection efforts, all harassment, and all foreclosure actions. It also permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove the debtor into bankruptcy.
The automatic stay, moreover, is not solely for the benefit of the debtor. It also protects the debtor’s creditors and promotes the goal of equality of distribution by ensuring that individual creditors do not seize assets that would otherwise be available to pay allowed claims in the case or take other actions that would interfere with administration of the case.
A violation of the automatic stay may be redressed by the bankruptcy court under its civil contempt powers. Additionally, the Bankruptcy Code gives an individual debtor a right of action for damages, including punitive damages and attorney’s fees, resulting from a willful violation of the automatic stay.
Therefore, the “automatic stay” provisions of the Bankruptcy Code should not be treated lightly or dismissed out of hand. The stay violation sanction can be significant. The sanctions apply equally to creditors whose intentional acts violate the stay, even if said creditor had never heard of the concept of the “automatic stay.” The important facts are whether the creditor knew a bankruptcy case had been filed and whether the creditor’s acts were intentional.
Best advice…when in doubt, contact a bankruptcy attorney for guidance before taking action.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
The filing of a bankruptcy petition results in the immediate implementing of the automatic stay. No motion need be filed, and no order need be entered by any court. The automatic stay operates as a broad stay of most types of creditor activity, including “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate” and “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case.” Section 362(a)(3) and (5).
The automatic stay is one of the fundamental debtor protections provided by the Bankruptcy Code. It gives the debtor a breathing spell from his creditors; it stops all collection efforts, all harassment, and all foreclosure actions. It also permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove the debtor into bankruptcy.
The automatic stay, moreover, is not solely for the benefit of the debtor. It also protects the debtor’s creditors and promotes the goal of equality of distribution by ensuring that individual creditors do not seize assets that would otherwise be available to pay allowed claims in the case or take other actions that would interfere with administration of the case.
A violation of the automatic stay may be redressed by the bankruptcy court under its civil contempt powers. Additionally, the Bankruptcy Code gives an individual debtor a right of action for damages, including punitive damages and attorney’s fees, resulting from a willful violation of the automatic stay.
Therefore, the “automatic stay” provisions of the Bankruptcy Code should not be treated lightly or dismissed out of hand. The stay violation sanction can be significant. The sanctions apply equally to creditors whose intentional acts violate the stay, even if said creditor had never heard of the concept of the “automatic stay.” The important facts are whether the creditor knew a bankruptcy case had been filed and whether the creditor’s acts were intentional.
Best advice…when in doubt, contact a bankruptcy attorney for guidance before taking action.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Saturday, January 2, 2010
Ex-Spouse Ordered to Turnover Unpaid Divorce Decree Obligations to Trustee Despite Inability to Pay
In Gallo v. Emery, 573 F.3d 433 (7th Cir. 2009), debtor initiated a chapter 13 bankruptcy case after the completion of state court divorce proceedings. The divorce court had required debtor’s ex-spouse to pay debtor $125,000 under the Illinois circuit court’s dissolution judgment. Debtor’s ex-spouse did not pay the judgment amount prior to debtor filing bankruptcy.
After filing bankruptcy, debtor filed a motion under §542(b) seeking an order requiring the ex-spouse to pay the chapter 13 bankruptcy trustee the amount that the ex-spouse owed debtor under the Illinois circuit court’s dissolution judgment. The ex-spouse opposed the motion on the ground that the ex-spouse did not have the ability to pay the $125,000. The bankruptcy court rejected the ex-spouse’s argument and entered an order directing the ex-spouse to pay to the trustee the $125,000. The district court affirmed.
The issue before the 7th Circuit was whether the bankruptcy court erred in ordering the ex-spouse to turnover the $125,000 to the chapter 13 trustee despite the ex-spouse’s alleged inability to pay the $125,000. The ex-spouse argued that the bankruptcy court erred in ordering the turnover because the court failed to establish that the ex-spouse had the ability to pay the payment.
The 7th Circuit affirmed the bankruptcy court’s order requiring the turnover of funds. The 7th Circuit held that the bankruptcy court had no obligation to ensure the ex-spouse’s ability to pay the judgment before granting the turnover motion. The 7th Circuit distinguished between turnover motions and contempt of court motions; the inability to pay is not defense to a turnover motion, but the inability to pay could be a defense to a later contempt of court motion.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
After filing bankruptcy, debtor filed a motion under §542(b) seeking an order requiring the ex-spouse to pay the chapter 13 bankruptcy trustee the amount that the ex-spouse owed debtor under the Illinois circuit court’s dissolution judgment. The ex-spouse opposed the motion on the ground that the ex-spouse did not have the ability to pay the $125,000. The bankruptcy court rejected the ex-spouse’s argument and entered an order directing the ex-spouse to pay to the trustee the $125,000. The district court affirmed.
The issue before the 7th Circuit was whether the bankruptcy court erred in ordering the ex-spouse to turnover the $125,000 to the chapter 13 trustee despite the ex-spouse’s alleged inability to pay the $125,000. The ex-spouse argued that the bankruptcy court erred in ordering the turnover because the court failed to establish that the ex-spouse had the ability to pay the payment.
The 7th Circuit affirmed the bankruptcy court’s order requiring the turnover of funds. The 7th Circuit held that the bankruptcy court had no obligation to ensure the ex-spouse’s ability to pay the judgment before granting the turnover motion. The 7th Circuit distinguished between turnover motions and contempt of court motions; the inability to pay is not defense to a turnover motion, but the inability to pay could be a defense to a later contempt of court motion.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Friday, January 1, 2010
Family Law Attorney Sanctioned for Willfully Violating Stay
In Sternberg v. Johnston, 582 F.3d 1114 (9th Cir. 2009), the court sanctioned an ex-wife’s family law attorney for willfully violating the automatic stay. The stay was violated by the attorney continuing to prosecute postpetition a divorce motion for contempt of court that had been filed prior to the bankruptcy case being filed. Debtor was awarded $20,000 for emotional distress and $2,883.20 in actual damages.
Prior to the bankruptcy case being filed, the divorce court had entered an order requiring debtor/husband to pay spousal support. Debtor/husband failed to make the required payments. The ex-wife, by and through her attorney, filed a motion for contempt of court for the husband’s failure to pay spousal support. Prior to the hearing on the motion, debtor/husband filed for chapter 11 bankruptcy relief.
At the divorce contempt hearing, debtor/husband informed the court that he had filed bankruptcy. The ex-wife’s attorney stated to the divorce court that the attorney did not know whether continuation of the contempt hearing would violate the stay. Nevertheless, in violation of the automatic stay, the divorce court entered an order finding debtor/husband in contempt of court and granted judgment for the ex-wife in the amount of $87,525. In addition, the divorce court’s order required debtor/husband to be jailed if the payment was not made by a date specified in the order.
Debtor/husband appealed the order to the state appellate court seeking reversal of the divorce court order. At that appellate hearing the ex-wife’s attorney argued that the divorce court order should be affirmed.
Debtor/husband also filed an emergency motion before the bankruptcy court to vacate the divorce court order. The bankruptcy court granted the motion and vacated the divorce court order holding debtor/husband in contempt.
Debtor/husband then filed an adversary proceeding against the ex-wife and the ex-wife’s attorney claiming they had violated the automatic stay. The ex-wife settled the claim against her; but the suit continued against the ex-wife’s attorney. The ex-wife’s attorney argued that the automatic stay may have been violated by the divorce court judge, but the stay was not violated by the ex-wife’s attorney. Alternatively, the ex-wife’s attorney argued that the attorney’s actions did not violate the stay because the US Bankruptcy Code provides an exception to the automatic stay for actions relating to the “establishment or modification of an order for domestic support obligations” or “the collection of a domestic support obligation from property that is not property of the estate.” Section 362(b)(2)(A)(B).
The bankruptcy court rejected the ex-wife’s attorney’s arguments and found that the attorney had willfully violated the automatic stay. The court found that the automatic stay imposed on the ex-wife’s attorney an affirmative duty of compliance with the bankruptcy laws. The court then found that the ex-wife’s attorney had violated the stay by affirmatively opposing debtor/husband’s appeal to the state appellate court seeking reversal of the divorce court’s order.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Prior to the bankruptcy case being filed, the divorce court had entered an order requiring debtor/husband to pay spousal support. Debtor/husband failed to make the required payments. The ex-wife, by and through her attorney, filed a motion for contempt of court for the husband’s failure to pay spousal support. Prior to the hearing on the motion, debtor/husband filed for chapter 11 bankruptcy relief.
At the divorce contempt hearing, debtor/husband informed the court that he had filed bankruptcy. The ex-wife’s attorney stated to the divorce court that the attorney did not know whether continuation of the contempt hearing would violate the stay. Nevertheless, in violation of the automatic stay, the divorce court entered an order finding debtor/husband in contempt of court and granted judgment for the ex-wife in the amount of $87,525. In addition, the divorce court’s order required debtor/husband to be jailed if the payment was not made by a date specified in the order.
Debtor/husband appealed the order to the state appellate court seeking reversal of the divorce court order. At that appellate hearing the ex-wife’s attorney argued that the divorce court order should be affirmed.
Debtor/husband also filed an emergency motion before the bankruptcy court to vacate the divorce court order. The bankruptcy court granted the motion and vacated the divorce court order holding debtor/husband in contempt.
Debtor/husband then filed an adversary proceeding against the ex-wife and the ex-wife’s attorney claiming they had violated the automatic stay. The ex-wife settled the claim against her; but the suit continued against the ex-wife’s attorney. The ex-wife’s attorney argued that the automatic stay may have been violated by the divorce court judge, but the stay was not violated by the ex-wife’s attorney. Alternatively, the ex-wife’s attorney argued that the attorney’s actions did not violate the stay because the US Bankruptcy Code provides an exception to the automatic stay for actions relating to the “establishment or modification of an order for domestic support obligations” or “the collection of a domestic support obligation from property that is not property of the estate.” Section 362(b)(2)(A)(B).
The bankruptcy court rejected the ex-wife’s attorney’s arguments and found that the attorney had willfully violated the automatic stay. The court found that the automatic stay imposed on the ex-wife’s attorney an affirmative duty of compliance with the bankruptcy laws. The court then found that the ex-wife’s attorney had violated the stay by affirmatively opposing debtor/husband’s appeal to the state appellate court seeking reversal of the divorce court’s order.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
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