Missouri Department of Social Services v. Spencer
868 F.3d 748
| 8th Cir. | 2017Background
- Michael and Patricia Spencer filed Chapter 13; Missouri Department of Social Services (MDSS) filed a proof of claim for child/spousal support arrears as a domestic support obligation (DSO).
- MDSS amended its claim upward months later; the Spencers objected, arguing Missouri law barred the additional amount; the bankruptcy court disallowed the amended claim.
- The Chapter 13 plan was confirmed based on the allowed claim ($36,026.27); the plan required payments to MDSS and the Spencers completed payments and received a discharge.
- Six weeks after discharge MDSS issued an Income Withholding Order seeking roughly $52,000 for the disallowed portion; Spencers’ counsel sought contempt sanctions for violation of the discharge injunction.
- The bankruptcy court awarded sanctions; the Bankruptcy Appellate Panel (BAP) reversed, holding the discharge injunction does not bar attempts to collect nondischargeable DSOs (including the disallowed portion).
- The Eighth Circuit affirmed the BAP, declined to consider newly raised § 105 arguments or to decide the preclusive effect of the claim-disallowance order, and expressly refused to rule on whether Spencer remains personally liable for the disallowed amount.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the § 524(a) discharge injunction bar post-discharge collection of a nondischargeable DSO, including a portion of a claim previously disallowed in bankruptcy? | Spencers: discharge injunction barred MDSS’s collection and contempt sanctions were proper. | MDSS: discharge injunction does not bar collection of nondischargeable DSO; attempt to collect did not violate discharge. | The court held the discharge injunction does not apply to nondischargeable DSOs; BAP reversal of sanctions affirmed. |
| Could the bankruptcy court nonetheless impose contempt/sanctions under § 105 for violation of the confirmed plan or for attempting to collect more than allowed? | Spencers: § 105(a) authorizes contempt/sanctions for violation of confirmed plan and final bankruptcy orders (citing In re Hann). | MDSS: its collection effort was reasonable given DSO nondischargeability; no contempt. | Court declined to affirm on this ground because the Spencers raised it first on appeal; did not adopt § 105-based sanction here. |
| Should this federal court decide whether the claim-disallowance order precludes MDSS from collecting the disallowed DSO (cross-appeal)? | MDSS: asked the court to interpret or limit BAP opinion to avoid altering the state support decree. | Spencers: maintain claim disallowance precludes collection; state courts can enforce preclusion. | Court declined to decide; left the issue (and any state-court resolution) for another day. |
Key Cases Cited
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (Sup. Ct. 2010) (DSOs are not dischargeable under any circumstances)
- Law v. Siegel, 134 S. Ct. 1188 (Sup. Ct. 2014) (§ 105(a) cannot contravene specific statutory provisions)
- In re Diaz, 647 F.3d 1073 (11th Cir. 2011) (attempts to collect post-discharge DSO are not barred by discharge injunction)
- In re Burnett, 646 F.3d 575 (8th Cir. 2011) (confirmation-plan provisions can specifically bar post-confirmation actions)
- In re Hann, 711 F.3d 235 (1st Cir. 2013) (discussing § 105 contempt authority in DSO context)
- Cent. Va. Cmty. Coll. v. Katz, 546 U.S. 356 (Sup. Ct. 2006) (limits on states’ sovereign immunity in bankruptcy ancillary jurisdiction)
- Local Loan Co. v. Hunt, 292 U.S. 234 (Sup. Ct. 1934) (ancillary jurisdiction principles)