601 B.R. 426
Bankr. E.D. Ky.2019Background
- Debtor (former wife) filed Chapter 13 on January 25, 2018; ongoing Kentucky family-court divorce/child-support litigation predated the bankruptcy and involved disputes over reimbursement of medical/other child-related expenses.
- Creditor (former husband) had filed pre-petition contempt and child-support motions; Family Court issued an oral September 2017 ruling and an August 2017 order allocating expense shares (68%/32%) and a 30/30 invoice rule.
- The Family Court held a scheduled February 19, 2018 hearing after Debtor’s bankruptcy filing and entered a judgment finding Debtor owed $1,270.66 in pre-petition child-expense arrears, directed wage withholding to satisfy the judgment, and ordered a $50 initial payment be delivered to the visitation supervisor; the court also found Debtor in contempt but reserved sanctions.
- Post-petition actions: Creditor sent texts demanding the $50 payment, filed a later contempt motion (Contempt Motion 3) seeking to enforce the $50 directive, and state and federal agencies intercepted Debtor’s state and federal tax refunds and applied them to child-support arrears; Creditor received intercepted funds.
- Debtor moved in bankruptcy under 11 U.S.C. § 362(k) for a finding that Creditor violated the automatic stay, seeking actual (including attorneys’ fees) and punitive damages; parties litigated jurisdictional and stay-exception issues, and the Court held an evidentiary hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Family Court could proceed post-petition to determine/establish pre-petition domestic-support arrearage | Wise: The automatic stay barred continuation; Family Court lacked jurisdiction and any post-petition judgment is void | Kelsay: §362(b)(2)(A)(ii) (establishment/modification of DSO) lets family court establish arrearages | Held: Family Court could establish the $1,270.66 arrearage under §362(b)(2)(A)(ii) (judgment establishing amount valid) |
| Whether the Family Court’s order requiring a $50 direct payment to the visitation supervisor violated the stay | Wise: Direct payment order sought collection from estate property and was barred without stay relief | Kelsay: Judgment directed collection; enforcement was appropriate | Held: Ordering wage garnishment was excepted (§362(b)(2)(C)), but ordering the $50 direct payment (not limited to non‑estate property) violated the stay and is void |
| Whether tax-refund intercepts and Creditor’s retention of intercepted funds violated the stay | Wise: Interception and Creditor’s retention of intercepted refunds were improper and actionable | Kelsay: §362(b)(2)(F) expressly permits tax-refund interception for child-support; retention was consistent with that exception | Held: Interception and Creditor’s retention did not violate the stay because §362(b)(2)(F) allows refund interception to collect support |
| Whether Creditor’s post-petition texts and Contempt Motion 3 (seeking contempt for failure to pay $50) violated the stay and whether violations were willful / damages owed | Wise: Texts and Contempt Motion 3 unlawfully attempted to collect pre-petition debt; Creditor had notice and conduct was willful—entitles Debtor to actual and punitive damages and attorneys’ fees | Kelsay: Family Court rulings and counsel’s advice permitted proceeding; some matters (visitation, DSO) fell within stay exceptions | Held: Sending collection texts and filing Contempt Motion 3 to enforce the $50 were willful stay violations; Debtor awarded $4,313.75 in attorneys’ fees (actual damages) and $1,000 punitive damages; intercepted refund amount not awarded because interception was permitted |
Key Cases Cited
- Dominic's Rest. of Dayton, Inc. v. Mantia, 683 F.3d 757 (6th Cir. 2012) (automatic stay generally stops continuation of pre‑petition judicial proceedings)
- Chao v. Hosp. Staffing Servs., Inc., 270 F.3d 374 (6th Cir. 2001) (concurrent jurisdiction and effect when non‑bankruptcy court errs about stay applicability)
- Easley v. Pettibone Mich. Corp., 990 F.2d 905 (6th Cir. 1993) (actions in violation of the stay are voidable; limited equitable exceptions)
- Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000) (statutory interpretation principles)
- TranSouth Fin. Corp. v. Sharon (In re Sharon), 234 B.R. 676 (6th Cir. BAP 1999) (withholding possession of estate property implicates §362(a)(3))
- Wohleber v. Skurko (In re Wohleber), 596 B.R. 554 (6th Cir. BAP 2019) (creditors must seek stay relief or bankruptcy-court determination; duty to stop collection upon notice)