The Intersection of Family Law and Bankruptcy - Look Both Ways Before Crossing - FEATURE | FAMILY LAW - Colorado Bar Association
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FEATURE | TITLE
FAMILY LAW
The
Intersection
of Family
Law and
Bankruptcy
Look Both Ways Before Crossing
BY PET E R CA L A N D JOR DA N F OX
32 | C OL OR A D O L AW Y E R | F E BRUA RY 2 01 9
This article discusses the treatment of domestic support obligations in bankruptcy cases.
W “
hen handling dissolution of erally isn’t subject to the automatic stay, but
marriage cases, expertise in collection of section 523(a)(15) debts is subject
both family law and bank- to the automatic stay. Third, a DSO is treated
ruptcy law is necessary to
maximize a client’s recovery and avoid sig-
The Bankruptcy as a first priority claim and is paid before other
unsecured claims.
nificant risks. Code creates two Section 101(14)(A) of the Bankruptcy Code
categories for
This article addresses critical issues a prac- defines a DSO as a debt that is owed to a spouse,
titioner must navigate when a client’s spouse a former spouse, or a child of the debtor that
or ex-spouse files a bankruptcy case before or
after entry of a divorce decree. It explains key
debts incurred is in the nature of alimony, maintenance, or
support and is established by a separation
concepts necessary to understanding options in divorce agreement, divorce decree, property settlement
proceedings:
in the family law context after a bankruptcy agreement, or court order. Whether a debt is a
filing and discusses DSO is determined by federal bankruptcy law,
■■ the scope of the automatic stay and when
a motion for relief from stay should be
(1) DSOs (11 not state law.3 To determine whether a debt is a
DSO, the bankruptcy court analyzes the shared
filed; USC section intent of the parties and whether the obligation,
523(a)(5)); and
■■ abstention; in substance, was support or in the nature of
■■ the scope of the discharge under different support. In determining the parties’ intent,
chapters of the Bankruptcy Code;
■■ plan confirmation issues and strategies
(2) any other the bankruptcy court looks to the underlying
agreement itself, as well as the surrounding
to maximize recoveries in the event of a debt incurred circumstances, such as employment status,
bankruptcy filing; and level of education, and the need for support.
■■ best practices for crafting a state court in a divorce Regardless of how the parties label the obli-
dissolution and support order when a
future bankruptcy filing is expected. proceeding (11 gation, if it has the practical effect of providing
support, the obligation is a DSO.4 The Tenth
Key Concepts
USC section Circuit has held that the term DSO is entitled
to a broad application.5 DSOs can include not
Whether a debt is a domestic support obligation 523(a)(15) debts). only payments to the former spouse, but also
(DSO), what assets are property of the bank- payments to third parties that have the practical
”
ruptcy estate, and the chapter of the Bankruptcy effect of reducing the former spouse’s living
Code1 under which the debtor seeks relief are expenses. For example, an obligation owed
critical to determining whether the automatic to a credit card company to pay a joint credit
stay applies and whether a debt is dischargeable card debt of a former spouse6 or an obligation
in a bankruptcy case. to pay a mortgage and hold the former spouse
other debt incurred in a divorce proceeding harmless from the obligation to pay the mortgage
DSOs and Other Debts (11 USC section 523(a)(15) debts).2 can both be characterized as DSOs.7 DSOs
In a bankruptcy case filed after a divorce pro- DSOs have greater protection in the Bank- can also include attorney fees incurred in a
ceeding, it is critical to understand the different ruptcy Code than other debts incurred in a state court proceeding related to the receipt
treatment provided for the various types of divorce proceeding in three important ways. or enforcement of DSOs.8
debts incurred in the divorce proceeding. First, DSOs cannot be discharged under any In sum, bankruptcy courts may have a
The Bankruptcy Code creates two categories Bankruptcy Code chapter, but section 523(a) broader view of what qualifies as a DSO than
for debts incurred in divorce proceedings: (1) (15) debts can be discharged in a chapter 13 a family law attorney initially may expect. For
DSOs (11 USC section 523(a)(5)); and (2) any proceeding. Second, collection of DSOs gen- example, what may appear to be a property
F E BRUA RY 2 01 9 | C OL OR A D O L AW Y E R | 33
FEATURE
FEATURE || TITLE
FAMILY LAW
transfer under state law could, under certain
circumstances, be a DSO in a bankruptcy case.
PRACTICE TIPS FOR
Property of the Bankruptcy Estate HANDLING BANKRUPTCY ISSUES
The Bankruptcy Code defines property of the IN DIVORCE PROCEEDINGS
1
estate very broadly to encompass all legal or
Consult with competent bankruptcy counsel. The rules of the bankruptcy
equitable interests of the debtor in property as
court are unique and do not necessarily follow the standard pathways in
of the commencement of the bankruptcy case,9
the domestic arena.
with a few exceptions not relevant to this article.
In a chapter 7 case, property of the bankruptcy
estate does not include post-petition earnings 2 File a motion for relief from stay even if you think you are dealing with
a DSO. This is a situation where it is better to ask for permission than to
beg for forgiveness.
or other property acquired by the debtor after
3
the bankruptcy filing.10 However, in chapter 11 To the maximum extent possible, characterize the obligations imposed
and 13 cases, property of the bankruptcy estate by the divorce orders as in the nature of support and provide the bank-
does include property acquired post-petition ruptcy court with as much information as possible about the state court’s
and post-petition earnings.11 and the parties’ intent. Where appropriate, state the facts regarding how the
order reduces the creditor spouse’s monthly expenses and note that absent
The Different Chapters a particular order, the court would have granted a higher or longer support
of the Bankruptcy Code order.
4
The property that is included in the bankrupt-
Where possible, secure the spouse’s obligation to make a payment or
cy estate and the availability of a discharge
property transfer with a security interest in the relevant property.
vary under the different Bankruptcy Code
chapters. It is thus important to identify at the
commencement of the bankruptcy case the 5 Consider including language in a settlement agreement that permits
the parties to return to the domestic court to adjust support payments
in the event a spouse fails to meet his obligations with respect to property
Bankruptcy Code chapter under which the
debtor has chosen to file. allocations.
6
In general, an individual with few unen- Again, consult with competent bankruptcy counsel!
cumbered assets who wants a discharge files a
chapter 7 bankruptcy case. There are, however,
limits on the amount of income an individual
can earn and still be eligible for chapter 7 relief.12
Subject to certain debt limits, an individual with is paid through a plan on the same basis as The protection of the automatic stay is broad,
regular income can file a chapter 13 bankruptcy other unsecured claims and is discharged and exceptions to the automatic stay are applied
case.13 In the chapter 13 case, an individual seeks when plan payments are complete, but a DSO narrowly.15 The consequences to the client
to confirm a plan and pay his creditors from is not discharged. Under chapters 7, 11, and and the attorney for violating the automatic
disposable income over a period of three to five 12, DSOs and section 523(a)(15) debts are not stay can be severe. Any act in violation of the
years. Chapter 11 is also available to individuals discharged. automatic stay is void, even where there is no
seeking to reorganize and is generally used notice of the bankruptcy filing.16 An individual
where the individual does not satisfy chapter The Automatic Stay injured by a willful violation of the automatic
13’s debt limits or is not eligible for a chapter 7 Among other things, a bankruptcy filing stays stay can recover actual damages, including
case based on his income level. Chapter 12 is 1. the commencement or continuation of costs and attorney fees. The award of actual
available for family farmers seeking to reorganize litigation against the debtor; damages is mandatory.17 Punitive damages
through a plan. 2. the enforcement of a judgment obtained also can be awarded.18
before the commencement of the bank- There are exceptions to the automatic stay
Scope of Relief ruptcy case against either the debtor or for certain types of family law proceedings.
For debts incurred in a divorce proceeding, property of the bankruptcy estate; The automatic stay does not apply to the com-
the scope of the discharge differs depending 3. any act to exercise control over property mencement or continuation of a civil action
on the Bankruptcy Code chapter under which of the bankruptcy estate; and ■■ to establish paternity;
the debtor files a bankruptcy case. In a chapter 4. any act to collect, assess, or recover a ■■ to establish or modify an order for a DSO;
13 case, a section 523(a)(15) debt typically pre-petition claim against the debtor.14 ■■ concerning child custody or visitation;
34 | C OL OR A D O L AW Y E R | F E BRUA RY 2 01 9
“
■■ to dissolve a marriage, except to the ex- tempt proceeding is criminal is the purpose
tent the dissolution proceeding seeks to and character of the sanctions imposed against
determine the division of property that is the contemnor.30 If the contemnor can purge
property of the estate; or
■■ regarding domestic violence.19
Further, the the contempt by paying the judgment, the
proceeding is a civil contempt proceeding
Further, the automatic stay does not apply to
the collection of a DSO from property that is not
automatic stay and is subject to the automatic stay.31 For a
contempt proceeding to be criminal, a trial
property of the estate,20 to a wage garnishment,21 does not apply court must find that the contemnor acted
to the collection
or to a criminal proceeding against the debtor, willfully in refusing to pay (that is, she had
including a criminal contempt proceeding knowledge of the order and the ability to pay
brought to enforce a pre-petition order of the
state court.22
of a DSO from the debt but nevertheless failed to do so).32
Particularly in a chapter 11 or 13 case, where
A creditor must notify the state court in a property that is property of the estate includes post-petition
not property of the
pending proceeding of the bankruptcy filing. earnings, it is less likely the contemnor would
This is often done by filing a “Suggestion of have assets that could be used to pay the DSO.
Bankruptcy.” A creditor must also affirmatively
cease all collection efforts, including taking
estate, to a wage Once again, relief from the stay could be sought
in the bankruptcy court to avoid any doubts
steps to withdraw an income assignment or garnishment, as to the application of the automatic stay in
or to a criminal
wage garnishment if it involves the collection a contempt proceeding.
of section 523(a)(15) debts.23 If there is any doubt whether the automatic
When is a Debt a DSO?
proceeding stay applies, a motion for relief from the auto-
matic stay should be filed with the bankruptcy
As stated above, whether a debt created by a against the debtor, court.33 The motion should seek a ruling that the
divorce decree is a DSO is determined by the automatic stay does not apply or, alternatively,
intent of the parties and the court’s consideration including a seek relief from the automatic stay if the court
of the surrounding circumstances. The Tenth
Circuit has stated that the label attached to an
criminal contempt finds the automatic stay does apply.34
obligation does not control, even if the relevant
agreement is unambiguous.24 In short, whether a
proceeding Relief from Stay
Relief from the stay is sought by filing a motion
debt is a DSO raises inherently factual issues.25 In brought to enforce in the bankruptcy case.35 Typically, a decision
a pre-petition
addition, even when the debt is a DSO, collection will be made in 30 to 60 days.36 Where neces-
of the DSO is stayed upon the filing of a bank- sary, relief from the stay can be sought on an
ruptcy case, unless collection is from property
that is not property of the bankruptcy estate
order of the emergency basis.37 It is a summary proceeding
determined on an expedited basis. Accordingly,
or is based on a DSO wage garnishment.26 For state court. the bankruptcy court does not rule on the merits
these reasons, it is often more judicious to seek of the claims.38
”
relief from the automatic stay before proceeding Under section 362(d)(1) of the Bankruptcy
in the pending state court divorce proceeding. Code, relief from stay “shall be granted” for
cause. Because “cause” is not defined in the
State Court Contempt Proceedings Bankruptcy Code, relief from stay for cause “is
Bankruptcy courts generally refer to contempt a discretionary determination made on a case
proceedings as civil (which are subject to the by case basis.”39 To determine whether cause
automatic stay) and criminal (which are not bankruptcy case, a former spouse should ensure exists to lift the automatic stay, bankruptcy
subject to the automatic stay). Colorado state that the trial court makes appropriate findings courts “apply a balancing test to weigh the
law refers to remedial sanctions and punitive to support its conclusion that the proceeding hardships suffered by the creditor under the
sanctions for contempt.27 A contempt proceeding is criminal and not civil.29 A criminal contempt automatic stay against those suffered by the
seeking remedial sanctions is civil, and one proceeding is designed to vindicate the dignity Debtors if the stay is lifted.”40 Once the moving
seeking punitive sanctions is criminal.28 of the court by punishing the contemnor for party makes an initial showing of cause, the
When pursuing a contempt proceeding knowingly violating a court order. The primary burden shifts to the debtor to demonstrate why
in state court against a debtor in a pending consideration in determining whether a con- the stay should remain in place. 41
F E BRUA RY 2 01 9 | C OL OR A D O L AW Y E R | 35
FEATURE | TITLE
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“
In re Curtis timely adjudicated in state court; (5) there is
In the Tenth Circuit, courts apply the “Curtis no independent basis for federal jurisdiction
factors” to determine whether to grant relief other than bankruptcy; and (6) the matter is
from the automatic stay to allow a creditor to
pursue claims in a pending state court pro-
While ‘the “non-core.”48 Actions are non-core if they do
not depend on the bankruptcy laws for their
ceeding. The Curtis factors are: divorce court is existence and could proceed in another court.49
the best forum
1. whether relief would result in a partial or Courts consider 12 factors when deciding
complete resolution of the issues; whether permissive abstention applies.50 Not
2. lack of any connection with or interference
with the bankruptcy case;
for the division of all 12 factors must be present for permissive
abstention to be appropriate. Ultimately,
3. whether the other proceeding involves marital property,’ permissive abstention focuses on the federal
the bankruptcy
the debtor as a fiduciary; court’s duty of comity to state courts and the
4. whether a specialized tribunal with the respect the federal courts should show to the
necessary expertise has been established
to hear the cause of action;
court retains state courts, particularly as to family law and
domestic relations matters.51
5. whether the debtor’s insurer has assumed jurisdiction to At the outset of the bankruptcy case, counsel
‘adjudicate the
full responsibility for defending it; should evaluate whether the state court is a
6. whether the action primarily involves more favorable forum based on the specific
third parties;
7. whether litigation in another forum would
impact of the state nature of the family law issues, the state court’s
expertise with the relevant family law issues, and
prejudice the interests of other creditors; court’s division the extent to which the state court has already
of property
8. whether the judgment claim arising from delved into the issues in the pending state court
the other action is subject to equitable proceedings. A former spouse should consider
subordination;
9. whether the movant’s success in the other
in a manner requesting the bankruptcy court to abstain from
deciding state law issues, such as what property
proceeding would result in a judicial lien
avoidable by the debtor;
that reflects is marital property. Under Colorado domestic
law, title to property does not necessarily control
10. the interests of judicial economy and the the priorities the characteristic of that property as marital or
established by
expeditious and economical resolution separate.52 Even if an asset is titled solely in a
of litigation; debtor’s name, the divorce court may determine
11. whether the parties are ready for trial in
the other proceeding; and
the Bankruptcy that the asset qualifies as marital property and
the former spouse’s interest in such property
12. the impact of the stay on the parties and Code.’ would not be property of the bankruptcy estate.53
the balance of harms.42 It is important to remember that relief from
”
“Not all of these factors will be relevant in stay may be necessary before proceeding in
every case . . . [a]nd the court need not give the state court if the bankruptcy court abstains.
equal weight to each factor.”43 Relief from stay is
appropriate where the bankruptcy court could The Discharge
not grant complete relief to the parties.44 This Abstention One of the primary reasons for filing a bank-
consideration is particularly relevant in a divorce Bankruptcy courts sometimes abstain from ruptcy case is to obtain a discharge of debts.54
proceeding related to the division of property a case that involves complex issues of state The Bankruptcy Code allows individuals to
because the bankruptcy court does not have law. Family law proceedings often fall into discharge pre-petition debts, subject to certain
jurisdiction to resolve issues such as custody this category. Abstention is governed by 28 exceptions,55 and imposes a “discharge injunc-
and support.45 While “the divorce court is the USC section 1334(c) and can be mandatory or tion” against any efforts to collect a discharged
best forum for the division of marital property,” discretionary. debt.56 Similar to a violation of the automatic
the bankruptcy court retains jurisdiction to Mandatory abstention applies when all stay, a violation of the discharge injunction
“adjudicate the impact of the state court’s of the following elements are present: (1) a exposes a person to actual damages, punitive
division of property in a manner that reflects party files a timely motion to abstain;47 (2) the damages, costs, and attorney fees.57 Therefore, it
the priorities established by the Bankruptcy action is based on state law; (3) an action is is essential to understand which debts incurred
Code.”46 pending in state court; (4) the action can be in a divorce proceeding are discharged.
36 | C OL OR A D O L AW Y E R | F E BRUA RY 2 01 9In a chapter 7, 11, and 12 case, DSOs and of the estate vests in the debtor unless the plan activity after confirmation of a chapter 13
section 523(a)(15) debts are not discharged.58 provides otherwise.68 A plan should provide that plan, the terms of the plan could do so for a
In contrast, in a chapter 13 case, DSOs are not property of the estate vests in the debtor except pre-petition DSO.74
discharged and section 523(a)(15) debts are for those funds necessary to make the payments For these reasons, a DSO creditor must
discharged.59 As explained above, whether a debt required under the confirmed plan.69 There are carefully review the chapter 13 plan to ensure
incurred in a divorce proceeding is a DSO often a number of additional requirements that a that it includes payment for all pre-petition DSOs
depends on disputed factual issues. Therefore, chapter 13 plan must satisfy to be confirmed.70 and that excessive amounts are not included in
when seeking to collect a debt incurred in a A confirmed chapter 13 plan binds the debtor property of the estate after plan confirmation.
divorce proceeding after a debtor obtains a and all creditors.71 The U.S. Supreme Court has While other details of chapter 13 plan
chapter 13 discharge, it is good practice to ask stated that a DSO is not dischargeable under confirmation are beyond the scope of this
the state court to make a finding that the debt any circumstances.72 article, counsel should consider whether a
is a DSO and, therefore, was not discharged. client would benefit by successfully objecting
To best protect the creditor spouse, the to plan confirmation based on DSO issues. A
“
practitioner should suggest a form of order debtor’s failure to remain current on the payment
in the state court order that confirms the pay- of post-petition DSOs is ground for blocking
ments fit within the definition of a DSO. Where confirmation of the plan, as well as grounds for
appropriate, focus on the relative income and dismissal or conversion of the case.75 If a debtor
education level of the parties and who the Bankruptcy is unable to confirm a plan, the bankruptcy case
primary caregiver for the children is, and include
this information in recital paragraphs. The courts, including would be converted to chapter 7 or dismissed.76
Under either of these scenarios, no debt based
parties can include an express statement that
a particular payment is in the nature of support
courts in the on a divorce proceeding would be discharged,
whether or not it is a DSO.
and would not be dischargeable in the event of District of
Colorado, do not
a future bankruptcy filing.60 If the former spouse Conclusion
will retain property in exchange for a payment, The Bankruptcy Code protects the interests
the client spouse should remain on the title until
the payments are made. If the title is already in
agree on what of former spouses and dependent children of
a debtor by prioritizing DSOs. Practitioners
the former spouse’s name, consider whether the it means for must be well-versed with the avenues for relief
property of the
obligation to make the payment can be secured under the various Bankruptcy Code chapters to
by a lien against the property and perfect that maximize the recovery for the former spouse
lien as soon as practicable.
Other grounds for objecting to discharge
estate to vest in and dependent children if a bankruptcy case
is filed.
may exist depending on the specific facts of the debtor after a
plan is confirmed.
a case. These could include a debt incurred
Peter Cal is a member of
based on fraud,61 embezzlement or larceny,62
Sherman & Howard’s Trial
or willful or malicious injury.63 The bankruptcy and Litigation Group in
”
court has exclusive jurisdiction to determine Denver. He focuses his
practice on all aspects of
these claims,64 and there are strict deadlines
bankruptcy and insolvency matters, including
for commencing an action based on these workouts, restructurings, bankruptcy court lit-
types of claims.65 igation, as well as financial and real estate liti-
gation in state and federal courts. Cal regularly
represents secured and unsecured creditors and
Plan Confirmation Issues These principles create confusing situations. chapter 7 trustees—pcal@shermanhoward.com.
Plan confirmation provides an opportunity for Bankruptcy courts, including courts in the Dis- Jordan Fox leads the family law practice group
a DSO creditor to protect her interests. trict of Colorado, do not agree on what it means at Sherman & Howard in Denver. He has dedi-
cated his legal practice to family law for more
A chapter 13 plan cannot be confirmed for property of the estate to vest in the debtor
than 20 years. Fox also serves as an expert
unless the debtor is current on the payment of all after a plan is confirmed.73 The issue becomes witness and consults with other attorneys on
post-petition DSOs.66 In addition, a pre-petition significant because the automatic stay precludes family law topics—jfox@shermanhoward.com.
DSO is entitled to first priority when plan pay- collection activity of DSOs from property of the
Coordinating Editors: Halleh Omidi, hto@
ments are distributed to unsecured creditors.67 estate, except for wage garnishments. Even if mcguanehogan.com; Courtney Allen, allen@
After a chapter 13 plan is confirmed, property the automatic stay does not preclude collection epfamilylawattorneys.com
F E BRUA RY 2 01 9 | C OL OR A D O L AW Y E R | 37FEATURE | TITLE
FAMILY LAW
NOTES
1. The Bankruptcy Code is codified at USC Title F.3d 1210, 1215 (9th Cir. 2002) (automatic stay (B.A.P. 10th Cir. 2003)).
11. imposes affirmative duty on creditor in pending 40. In re Rouse, 301 B.R. 86, 89 (Bankr. D. Colo.
2. DSOs are defined at Bankruptcy Code action to dismiss or stay proceeding); Lawrence 2003).
section 101(14A). Any other debt incurred in a Athletic Club v. Scroggin (In re Scroggin),
41. 11 USC § 362(g); Dryja, 425 B.R. at 611.
divorce proceeding is included in the exception 364 B.R. 772, 779–80 (B.A.P. 10th Cir. 2007)
(judgment creditor must notify garnishee of 42. In re Curtis, 40 B.R. 795, 799–800 (Bankr. D.
to discharge provided by section 523(a)(15) of
release of garnishment to effectuate termination Utah 1984).
the Bankruptcy Code.
of garnishment). 43. Dryja, 425 B.R. at 611 (quotation omitted).
3. See, e.g., Sampson v. Sampson (In re Samp-
24. Sampson, 997 F.2d at 722–23. See also Dampier v. Credit Invs., Inc. (In re
son), 997 F.2d 717, 721 (10th Cir. 1993) (whether
Dampier), 2015 Bankr. LEXIS 3800 at *9 (B.A.P.
a debt is a nondischargeable DSO is a question 25. Id. at 721 (“Whether an obligation to a former
10th Cir. Nov. 5, 2015).
of federal law). spouse is actually in the nature of support is a
factual question . . . .”). 44. See Baack v. Horizon Womens Care Prof’l
4. Id. at 726 (finding an obligation is in sub-
LLC (In re Horizon Womens Care Prof’l LLC),
stance support where it “effectively functions 26. Gazzo, 505 B.R. at 42 (trial court must
506 B.R. 553, 559 (Bankr. D. Colo. 2014)
as the former spouse’s source of income”). make a specific finding that there is non-estate
(refusing relief from stay provides no benefit to
5. Jones v. Jones (In re Jones), 9 F.3d 878, 882 property from which the debtor can pay the
any party where the bankruptcy court cannot
(10th Cir. 1993) (support as used in section DSO) (citing In re Marriage of Weis, 232 P.3d 789
deal with the unresolved issues); Midwest Motor
523(a)(5) of the Bankruptcy Code is entitled to (Colo. 2010)).
Supply Co. v. Hruby (In re Hruby), 512 B.R. 262,
a broad application). 27. See CRCP 107. 270 (Bankr. D. Colo. 2014) (where the bankrupt-
6. In re Wodark, 425 B.R. 834, 837 (B.A.P. 10th 28. In re Marriage of Cyr, 186 P.3d 88, 91–92 cy court does not have jurisdiction to resolve
Cir. 2010) (obligation to pay joint credit card (Colo.App. 2008) (discussing elements of the disputes “denying relief cannot serve any
debt is a DSO even where there is no express punitive and remedial contempt). interest of judicial economy”).
hold harmless or indemnification agreement 29. In re Marriage of Nussbeck, 974 P.2d 493, 501 45. Dryja, 425 B.R. at 611–12 (discussing state
with the former spouse). (Colo. 1999) (identifying the findings the trial court expertise on issues related to division
7. See Robinson v. Robinson (In re Robinson), court should make when deciding a contempt of property); MacDonald v. MacDonald (In re
921 F.2d 252, 253 (10th Cir. 1990); Busch v. proceeding is criminal, including that the MacDonald), 755 F.2d 715, 717 (9th Cir. 1985)
Hancock (In re Busch), 369 B.R. 614, 622–23 contemnor had the ability to pay). (“It is appropriate for bankruptcy courts to
(B.A.P. 10th Cir. 2007). 30. Weis, 232 P.3d at 796 (discussing a con- avoid incursions into family law matters out
8. Jones, 9 F.3d at 882 (attorney fees incurred tempt proceeding in the context of the failure to of consideration of economy, judicial restraint,
in a child custody proceeding are a nondis- pay a DSO). and deference to our state court brethren and
chargeable DSO); In re Notary, 547 B.R. 411, their established expertise in such matters.”)
31. Id. at 797 (“A civil, or remedial, contempt
421–22 (Bankr. D. Colo. 2016) (attorney fees (citation omitted).
proceeding—such as one involving a sanction
incurred in the course of a divorce proceeding that can be purged—is subject to the stay.”). 46. Dryja, 425 B.R. at 613.
are nondischargeable even if they are to be 47. Motions to remand are governed by 28 USC
32. Id. (contempt proceeding is not criminal
paid by the debtor spouse directly to the other § 1452 and Fed.R.Bankr.P. 9027.
where the trial court finds the debtor does not
spouse’s attorneys).
have the ability to pay the debt). See also Cyr, 48. Notary, 547 B.R. at 417 (concluding that
9. 11 USC § 541(a)(1); In re Dagen, 386 B.R. 777, 186 P.3d at 92. mandatory abstention applies where debtor
781 (Bankr. D. Colo. 2008). removed state court action to bankruptcy
33. See, e.g., Gagliardi, 290 B.R. at 818 (“A
10. 11 USC § 541(a)(6) (excluding from property creditor and its agents act at their own peril court where attorneys for former spouse were
of the estate post-petition earnings of an when they usurp the bankruptcy court’s role seeking to collect nondischargeable fee award).
individual debtor). in determining the scope of the automatic 49. Id. at 419 (citing In re Gardner, 913 F.2d 151,
11. 11 USC §§ 1115(a) and 1306(a). stay, without binding authority that is clearly 1518 (10th Cir. 1990)).
12. 11 USC § 707(b). applicable to the facts at hand. Filing a stay 50. Id. at 419–20 (identifying the factors
relief motion is an inexpensive form of insurance relevant to permissive abstention).
13. 11 USC § 109(e).
against a stay violation award.”).
14. 11 USC § 362(a). 51. Id. at 419 (“comity is the respect owed by
34. See Barner v. Saxon Mtg. Servcs., Inc. (In one political subdivision to honor the legisla-
15. Dagen, 386 B.R. at 781 (the automatic stay re Barner), 597 F.3d 651, 654 (5th Cir. 2010) tive, executive or judicial acts of other political
“throws a broad blanket of protection over a (concluding that a declaration that the automat- subdivisions”).
debtor and property of the estate”); Gazzo ic stay does not apply does not “fall within the
v. Ruff (In re Gazzo), 505 B.R. 28, 35 (Bankr. 52. CRS § 14-10-113 (marital property includes
bounds of Rule 7001” and can be obtained by
D. Colo. 2014) (the automatic stay should be all property acquired during the marriage
motion rather than adversary proceeding).
construed broadly in favor of the debtor and unless it falls within limited exceptions found in
35. See Fed.R.Bankr.P. 4001(a). CRS § 14-10-113(2)).
the exception should be applied narrowly).
36. 11 USC § 362(e) (setting forth deadlines in 53. See Dryja, 425 B.R. at 612 (the nature
16. Job v. Calder (In re Calder), 907 F.2d 953,
which the court must decide the motion). These and extent of a debtor’s legal and equitable
956 (10th Cir. 1990).
deadlines can be extended by the court or interests are determined by state law); Reinbold
17. In re Gagliardi, 290 B.R. 808, 819–20 (Bankr. waived by the moving party. v. Thorpe (In re Thorpe), 546 B.R. 172, 177
D. Colo. 2003).
37. See generally Fed.R.Bankr.P. 4001(a)(2). (Bankr. C.D. Ill. 2016) (“The divorce court is the
18. 11 USC § 362(k). appropriate forum to equitably allocate martial
38. See Santangelo Law Offices, P.C. v. Touch-
19. 11 USC § 362(b)(2)(A). stone Home Health LLC (In re Touchstone property.”).
20. 11 USC § 362(b)(2)(B). Home Health LLC), 572 B.R. 255, 283 (Bankr. 54. See McVay v. DiGesualdo (In re DiGesualdo),
21. 11 USC § 362(b)(2)(C); Jordahl v. Dyal (In re D. Colo. 2017) (“Relief from stay proceedings 463 B.R. 503, 524 (Bankr. D. Colo. 2011) (a
Jordahl), 555 B.R. 861, 866–67 (Bankr. S.D. Ga. are summary in nature and determined on an “central purpose of the Bankruptcy Code” is
2016) (section 362(b)(2)(C) limits the exception expedited basis. ‘It is not a full determination to provide a “fresh start” to the “honest but
to withholding income through wage garnish- on the merits.’”) (quoting U.S. Bank, N.A. v. unfortunate debtor”) (quoting Standiferd v. U.S.
ments or income deduction orders). Brumfiel (In re Brumfiel), 514 B.R. 637, 645 Trustee, 641 F.3d 1209, 1212 (10th Cir. 2011)).
(Bankr. D. Colo. 2014)). 55. See 11 USC §§ 727, 1141, 1228, and 1328.
22. 11 USC § 362(b)(1).
39. In re Dryja, 425 B.R. 608, 611 (Bankr. D. Colo. 56. See 11 USC § 524(a).
23. See, e.g., Eskanos & Adler, P.C. v. Leetien, 309
2010) (quoting In re Busch, 294 B.R. 137, 140
38 | C OL OR A D O L AW Y E R | F E BRUA RY 2 01 9FEATURE | TITLE
FAMILY LAW
57. See, e.g., Peyrano v. Sotelo (In re Peyrano), the estate in the debtor or any other entity on a chapter 13 case to a chapter 7 case or dismiss
B.A.P. No. EO-160032, 2017 WL 2731299 at *6 confirmation of the plan or at another time). the chapter 13 case, whichever is in the best
(B.A.P. 10th Cir. June 26, 2017). 69. See In re Segura, No. 08-14280 MER, 2009 interests of creditors and the estate, if the debt-
58. 11 USC §§ 523(a)(5) (DSO) and 523(a) WL 416847 at **3–4 (Bankr. D. Colo. Jan. 9, or is unable to confirm a plan); In re Khan, No.
(15) (any debt to a spouse, former spouse, or 2009) (court will not confirm a plan in which 14-13514 MER, 2015 WL 739854 at *6 (Bankr.
child other than a DSO incurred in a divorce the estate holds greater assets than is neces- D. Colo. Feb. 19, 2015) (denying confirmation
proceeding). sary to make plan payments). of amended chapter 13 plan and dismissing
chapter 13 case where there is no evidence the
59. 11 USC §§ 523(a) (5) and 1328(a)(2). 70. See generally 11 USC § 1325 (identifying
debtor would be able to confirm a plan in the
60. See Weis, 232 P.3d at 795. circumstance under which court must confirm a
future).
chapter 13 plan).
61. 11 USC § 523(a)(2).
71. 11 USC § 1327(a).
62. 11 USC § 523(a)(4).
72. United Student Aid Funds, Inc. v. Espinosa,
63. 11 USC § 523(a)(6).
559 U.S. 260, 273 n.10 (2010) (declining to state
64. 11 USC § 523(c)(1); Resolution Trust Corp. under what circumstances a judgment dis-
v. McKendry (In re McKendry), 40 F.3d 331, charging a DSO could be set aside as void). As
335–36 (10th Cir. 1994). discussed herein, a confirmed chapter 13 plan
65. Fed.R.Bankr.P. 4007(c) and (d); Themy v. can be res judicata in establishing the amount
Yu (In re Themy), 6 F.3d 688, 689 (10th Cir. of DSOs that must be paid under a plan.
1993) (noting that the Tenth Circuit has strictly 73. See Segura, 2017 WL 416847 at *6 (dis-
construed the deadlines). cussing different interpretations of vesting of
66. See 11 USC § 1325(a)(8). property in the debtor after plan confirmation).
67. See 11 USC § 507(a)(1). 74. See Dagen, 386 B.R. at 783 (confirmed plan
68. 11 USC § 1327(b); Dagen, 386 B.R. at 782. precluded collection of DSO).
See also 11 USC § 1322(a)(9) (chapter 13 plan 75. 11 USC § 1307(c)(11).
must provide for the vesting of property of 76. See 11 USC § 1307(c)(5) (court may convert
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