Can filing bankruptcy get you out of jail for failing to pay alimony?

A recent case before the United States Appellate Panel of the First Circuit (In re DeSouza, 493 BR 669 – Bankr. Appellate Panel, 1st Circuit 2013) addressed whether a family court judge could legally order a debtor to be in contempt for failing to pay alimony during a pending chapter 13 bankruptcy.

The debtor filed a petition under chapter 13 of the Bankruptcy Code in January 2011. In June 2011, the debtor’s spouse filed a complaint for divorce. After a hearing on September 30, 2011, the probate court entered an order granting alimony to the debtor’s spouse in the amount of $150.00 per week. When the debtor failed to make his alimony payments, his spouse started contempt proceedings and, after a trial in February 2012, the probate court entered an order of contempt. Thereafter, the contempt hearing was continued until June 1, 2012, when the debtor failed to appear at a hearing and the probate court issued a capias (latin for a writ ordering the arrest of a person).

The bankruptcy court confirmed the debtor’s chapter 13 plan on June 28, 2012. The chapter 13 plan did not address the monthly alimony payments but the debtor’s Schedule J listed alimony payments of $600.00 per month.

On December 5, 2012, the debtor was arrested pursuant to the capias and the probate court ordered that he be incarcerated for thirty days unless he paid $5,000.00 in arrears in connection with his delinquent alimony payments.

On December 7, 2012, the debtor’s attorney filed a an emergency motion seeking a determination regarding “the validity of entry and enforcement of a domestic relations order post petition.” The debtor’s attorney argued that the non-filing spouse had a failed to request relief from the automatic stay as the debtor’s spouse was seeking collection and enforcement of domestic support payments from property of the estate. He claimed, therefore, that the alimony and contempt orders were null and void as they were entered in violation of the automatic stay, and that the debtor’s incarceration was not warranted by law.

The bankruptcy court held a hearing on the motion on December 10, 2012 and considered the debtor’s argument that because the alimony payments were to come from the debtor’s post-petition income, which is property of the estate, the Section 362(b)(2)(B) exception to the automatic stay did not apply. The bankruptcy court applied Section 362(b)(2)(C) exception to the automatic stay and concluded that “even post-petition earnings are not subject to the automatic stay to the extent that they are due under a judicial or administrative order.”

A three judge panel reviewed the bankruptcy court’s findings of fact for clear error and its conclusions of law de novo to determine whether the automatic stay provisions of Section 362 were violated.

The panel stated that the alimony payments were to be made from the debtor’s “post-petition earnings” so the Section 362(b)(2)(B) exception does not apply as that exception only allows for the collection of a domestic support obligation from property that is not property of the estate.

The Section 362(b)(2)(C) exception also does not apply as there was no withholding under a judicial or administrative order or a statute. Most of the cases applying the Section 362(b)(2)(C) exception involved a wage garnishment order but no such wage garnishment order was present in this case.

Ultimately, the panel decided that both exceptions to the automatic stay did not apply and determined that that probate court violated the automatic stay by finding the debtor in contempt and ordering the debtor’s incarceration for failure to pay alimony.

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