Court Opinion

ID: 5173897
Source: CourtListenerOpinion
Date Created: 2022-01-02 05:16:22.574727+00
Date Added: 2024-06-11T08:26:12.234799
License: Public Domain

BAKES, Chief Justice,
dissenting:
The issue in this case is not whether the child support obligation owed by appellant, Jay Miller, is dischargeable in bankruptcy. Non-dischargeability has nothing to do with whether appellant is entitled to the protection of the automatic stay granted by the bankruptcy laws.
Rather, the issue is whether or not the appellant can be held in contempt for not *17applying his “earnings from services performed ... after the commencement of the case but before the case is closed” (11 U.S.C. § 1306) for any other purpose than that set out in the Chapter 13 bankruptcy plan. It is clear that under the Bankruptcy Code he cannot, and therefore he cannot be held in contempt.
It is true that under 11 U.S.C. § 362(b)(2) the automatic stay does not apply to any property not the property of the debtor’s estate. However, in a Chapter 13 bankruptcy, the debtor’s post-petition wages are property of the estate. 11 U.S.C. § 1306(a)(2) states, “Property of the estate includes ... earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7 or 11 of this title, whichever occurs first.” A state court has no authority to determine how those “earnings from services performed by the debtor after commencement of the case” are disposed of. That is reserved to the bankruptcy court under the Bankruptcy Code. Therefore, the automatic stay is applicable, and the contempt order in this case must be set aside.
The court today cites no authority for its decision. The cases hold otherwise. In re Marriage of Lueck, 140 Ill.App.3d 836, 95 Ill.Dec. 222, 489 N.E.2d 443 (1986). Although the majority distinguishes Lueck on the basis that the debt involved there was pre-petition child support obligations rather than post-petition obligations, such distinction is immaterial because whether the stay is applicable depends upon whether the contempt order is directed to the debtor’s post-petition wages which are a part of the bankruptcy estate. In its discussion the Lueck court states:
Where the contempt is invoked as a sanction for failure to pay a judgment or to compel the expenditure of money from a bankrupt’s estate, the proceedings are not exempt from the automatic stay of section 362(a).....
... Section 1306(a)(2) defines property of the estate, for purposes of a chapter 13 bankruptcy, to include earnings from services performed by the debtor after the commencement of the bankruptcy case but before the case is closed or dismissed. Therefore, while section 363 does not bar a proceeding against non-estate property to collect arrearages in child support, by the definition of property of the estate in section 1306(a)(2) there is little or no non-estate property against which to proceed and, therefore, the trial court should have granted defendant’s motion to stay the prior contempt order against property of the estate.
449 N.E.2d at 444-445 (emphasis added).
Under Chapter 13 of the Bankruptcy Code the debtor files a plan to which all his “disposable income” must be applied. See, 11 U.S.C. § 1325(b). Therefore, to the extent that the district court’s contempt order requires the bankrupt to pay his post-filing earnings from services in any manner other than as provided in the Bankruptcy Code, the state court violates the supremacy of the bankruptcy court order.
There are alternatives that are available to the respondent for collection of the child support. The court in In re Adams, 12 B.R. 540 (Bankr.Utah 1981), stated:
[Although the ex-spouses’s collection action is initially held at bay by the breadth of the Section 1306 estate, once confirmation occurs, a more equitable balance is struck between the needs of the debtor to rehabilitate himself and those of his dependents seeking lawful support.
At this point [confirmation], she has the right to proceed against the wages of the debtor in the amount they exceed the payments to the trustee under the plan and may further proceed against any property claimed as exempt which is not being used to fund the plan, and any other property which has likewise been retained by the debtor and is not necessary to the execution of the plan as proposed.
12 B.R. at 542-543.
Additionally, the court of In re Denn, 37 B.R. 33 (Bankr.Minn.1987), stated:
*18The rights of obligee spouses will be protected under the Code. Congress, in writing the Code, and the courts, in interpreting it, have given great deference to those owed alimony, maintenance, and support by bankrupt debtors. See e.g., Section 362(b)(2), Section 532(a)(5), and Section 1328(a)(2) which except these marital debts from discharge.
37 B.R. at 36.
The drafters of the Bankruptcy Code struck a balance among the competing policies relating to the debtor’s creditors, including the obligee spouse. The district court’s order compelling payment of post-petition wages to the obligee spouse through its power of contempt disrupts the balance set out in the Bankruptcy Code. Therefore, the contempt order violates the bankruptcy stay order. The order of contempt entered in this case should be reversed.