BANKRUPTCY COURT OPINION REGARDING BANKRUPTCY DEBTOR’S CONTEMPT MOTION
BANKRUPTCY AND ATTORNEY FEES
A. Introduction
This case came before the Court for hearing on January 19, 2011 and on March 30, 2011 on a motion filed by Debtor entitled “Motion for Order for Contempt, Damages and Attorney Fees for Willful Violation of the Automatic Stay and Creditor Misconduct” (Docket # 18, the
“Motion”).
BANKRUPTCY COURT CONDUCTED TWO HEARINGS
At both the January 19 and March 30 hearings, the Court made certain findings, conclusions, and rulings regarding the Motion, all of which the Court now incorporates by reference into this opinion. At the conclusion of the March 30 hearing, the Court took the Motion under advisement.
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One of the issues to be decided concerns the Bankruptcy Code’s definition of “domestic support obligation.” That definition requires, among other things, that in order for a debt to be a “domestic support obligation,” the debt must be “owed to or recoverable by — (I) a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible
relative; or (ii) a governmental unit.” 11 U.S.C. § 101(14A)(A).
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UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION, In re: Case No. 10-74187, THOMAS F. MURPHY, Chapter 7 Debtor. Judge Thomas J. Tucker, Signed on April 5, 2011 Partial source
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In this case, the Debtor,Thomas Murphy, argues that the debt in question does not meet this requirement, and therefore is not a domestic support obligation. The creditor, Dayna Milbrand, argues the opposite.
MACOMB COUNTY DIVORCE ORDERED ATTORNEY FEES
B. Facts
The facts relevant to this issue are undisputed. The debt in question arises from the Consent Judgment of Divorce that was entered by the Macomb County Circuit Court on April 9,2009 (the “Judgment”).1 The Judgment divorced the Debtor from Stacey Murphy. It contained
numerous provisions, including a provision requiring Debtor to pay attorney fees to Dayna Milbrand in the amount of $2,500.00. Ms. Milbrand was Stacey Murphy’s attorney in the divorce case.
The provision in question states:
ATTORNEY FEES
IT IS FURTHER ORDERED AND ADJUDGED that [Thomas
Murphy] shall pay attorney fees to Dayna Milbrand in the amount
of $2,500.00, by cashing in one of his 401(K) related assets to
make said payment, within sixty (60) days from the entry of this
Judgment of Divorce. Upon failure to pay said sum then such
amount can be collected through all collection remedies available
at law, as if these funds were a Judgment.
IT IS FURTHER ORDERED AND ADJUDGED that each party
shall pay their own attorney fees and costs associated with this
divorce action.2
The Judgment also contains a section labeled “Non-Dischargeability,” which states:
NON-DISCHARGEABILITY
IT IS FURTHER ORDERED AND ADJUDGED that [Stacey
Murphy and Thomas Murphy] acknowledge that by assuming their
individual share of the marital debts that they have under this
property settlement, they have assumed all domestic obligations
which are not dischargeable under the Bankruptcy Code 11 USC
1328(B)(5). In the event either party discharges or attempts to
discharge in bankruptcy any debt for which any creditor then seeks
to sue or compel payment or receives judgment against for the
discharged debt from the non-bankrupt party, then the bankrupt
party shall indemnify the other party in full for any liability
incurred.3
ATTORNEY GAVE CLIENT FOR FEES OPPOSITE PARTY ORDERED TO PAY
When the Judgment was entered, Dayna Milbrand gave her client, Stacey Murphy, a credit on her attorney fee bill for the $2,500.00 that Debtor was required to pay to Ms. Milbrand.
DEBTOR DID NOT PAY THE ATTORNEY FEES
Debtor did not pay the $2,500.00 attorney fee debt to Dayna Milbrand. Nor did he reimburse Stacey Murphy in any amount for these attorney fees.
ATTORNEYS CLIENT FILED FOR BANKRUPTCY. ANY OBLIGATION TO HER ATTORNEY WAS DISCHARGED
Stacey Murphy filed her own Chapter 7 bankruptcy case in this Court, on June 2, 2010 (Case No. 10-58179). The parties agree that the discharge that Stacey Murphy received in that case, on September 14, 2010,4 discharged any debt that Stacey Murphy may have had for attorney fees to Dayna Milbrand.
DEBTOR THEN FILED HIS BANKRUPTCY
Debtor filed a voluntary Chapter 7 bankruptcy petition on November 9, 2010, commencing this case.
ATTORNEY IGNORED THE AUTOMATIC STAY AND FILED IN STATE COURT TO GET ATTORNEY FEES
Dayna Milbrand then filed a motion in the Macomb County Circuit
Court, on December 6, 2010, seeking to enforce Debtor’s obligation to pay her the $2,500.00 attorney fees.5 Ms. Milbrand filed her motion in state court without seeking or obtaining relief from the automatic stay in this Court. Debtor’s present Motion followed.
BANKRUTPCY QUESTION ARE ATTORNEY FEES DOMESTIC SUPORT AND EXEMPT FROM BANKRUPTCY. COURT SAYS NO
C. Discussion After considering the arguments of the parties and surveying the case law on the issue, the Court concludes that the Debtor’s obligation under the Judgment to pay $2,500.00 in attorney fees to Dayna Milbrand cannot be deemed a “domestic support obligation,” because it is not a
debt “owed to or recoverable by — (I) a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible relative; or (ii) a governmental unit.” 11 U.S.C. §
101(14A)(A).
THE ATTORNEY ALLOWED IT TO BE A DEBT TO THE ATTORNEY
The debt in question is owed to Dayna Milbrand, and she is not one the entities listed in this statute. The debt is not “owed to or recoverable by” Debtor’s “former spouse,” Stacey Murphy, because Stacey Murphy is not liable to Dayna Milbrand for the $2,500.00 in attorney fees in question, and cannot possibly ever become liable for such fees, in the event the
Debtor Thomas Murphy fails to pay them.
ATTORNEY ACKNOWLEDGES CLIENTS BANKRUPTCY ABSOLVED OBLIGATION
As Ms. Milbrand correctly acknowledges, the discharge that Stacey Murphy received in her bankruptcy case on September 14, 2010 discharged
any debt that Stacey Murphy may have had for attorney fees to Dayna Milbrand. Thus, from well before the date on which the Debtor Thomas Murphy filed this bankruptcy case, the “former spouse,” Stacey Murphy, could not held liable or otherwise be adversely affected if the Debtor
failed to pay Ms. Milbrand the $2,500.00 in fees. And the indemnification clause in the Judgment, quoted above, could not apply to give Stacey Murphy a right to any relief against the Debtor Thomas Murphy, because Stacey Murphy cannot possibly “incur” any “liability” for Ms.
Milbrand’s fees, due to Ms. Murphy’s bankruptcy discharge.
IT IS NOT A DOMESTIC SUPPORT OBLIGATION
In this situation, the debt in question cannot be deemed to be “owed to or recoverable by” the former spouse Stacey Murphy, within the meaning of the § 101(14A)(A) definition of “domestic support obligation,” because Stacey Murphy is not liable, and can never be liable, for
the attorney fees in question. This Court agrees with what the court in Kassicieh v. Battisti (In Kassicieh), 425 B.R. 467, 477-81 (Bankr. S.D. Ohio 2010) called the “third line of authority” on this question. Under that view of § 101(14A)(A), and its predecessor, the pre-2005 version of 11
U.S.C. § 523(a)(5),
The debt must be in the nature of support, but also must be a debt
to the former spouse or child. This ‘‘debt to’’ element can be
satisfied when the obligation is payable directly to a third party,
typically a professional who provided services to benefit the wife
or child, but only if the former spouse is also obligated for the fees.
425 B.R. at 478 (emphasis added by the Kassicieh court)(quoting Simon, Schindler & Sandberg,
LLP v. Gentilini (In re Gentilini), 365 B.R. 251, 256 (Bankr. S.D. Fla. 2007). See also In re
Johnson, 397 B.R. 289, 296 (Bankr. M.D.N.C. 2008).
DEBTOR FILED BANKRUTPCY AND DEBT OWED TO ATTORNEY WAS NOT DOMESTIC SUPPORT
It follows that the Debtor’s debt under the Judgment — his obligation to pay $2,500.00 in attorney fees to Dayna Milbrand — is not a “domestic support obligation.” As a result, the Court must reject Ms. Milbrand’s argument that 11 U.S.C. § 362(b)(2)(B) applies to her action in filing
her state court motion against Debtor.
The Court also must reject Ms. Milbrand’s argument that her state court motion is covered by 11 U.S.C. § 362(b)(3). Ms. Milbrand’s filing of her state court motion was not an “act to perfect, or to maintain or continue the perfection of, an interest in property . . .” within the
meaning of § 362(b)(3). Ms. Milbrand had no “interest in [any] property” of the Debtor, Thomas Murphy before Mr. Murphy filed bankruptcy or when Ms. Milbrand filed her state court motion.
D. Conclusion
ATTORNEY INTENTIONALLY VIOLATED THE AUTOMATIC STAY
Based on the foregoing, and based on the other findings, conclusions, and rulings that the Court made during the January 19 and March 30 hearings on the Motion, the Court finds and concludes that Dayna Milbrand willfully violated the automatic stay when she filed her state court motion on December 6, 2010 and pursued that motion. Ms. Milbrand was aware of Debtor
Thomas Murphy’s bankruptcy case when she filed her state court motion, and the filing and prosecution of that motion violated the automatic stay under 11 U.S.C. § 362(a)(1), (a)(2), and (a)(6). Debtor is entitled to appropriate relief under 11 U.S.C. § 362(k)(1).
The Court will enter an order for further, appropriate proceedings on Debtor’s Motion.
Signed on April 5, 2011 /s/ Thomas J. Tucker
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