Bankruptcy Automatic Stay Does Not Apply to Civil Actions for the Establishment or Modification of Domestic Support Obligations, Including Establishment or Modification Which Collects Outstanding Child Support Obligations-Published Opinion from United States Court of Appeals for the Sixth Circuit

100 Dollar Bill

In re: Michelle Dougherty-Kelsay v. Michael Stephen Kelsay

U.S. Court of Appeals for the Sixth Circuit

Family Court ordered Mother to pay monthly child support and 32% of childcare expenses to Father. Shortly thereafter, Father filed for contempt due to Mother’s refusal to pay certain child related expenses. Child then incurred certain medical related expenses, for which Father requested reimbursement. Mother filed for bankruptcy. Mother argued that her bankruptcy petition stayed the contempt proceedings against her, but the Family Court found that the stay did not apply because the hearing was related to her domestic support obligations. The Family Court entered a judgment setting Mother’s arrearage, increased Mother’s wage withholdings, and intercepted Mother’s tax refund. The Family Court also found Mother in contempt.

Father filed another contempt motion with the family court for Mother’s failure to pay the child related medical expense. In response,  Mother filed a Motion in Bankruptcy Court, arguing Father violated the automatic stay. The Bankruptcy court found that Father violated the automatic stay and awarded Mother $4,313.75 in attorney’s fees and $1,000 in punitive damages, on the basis that the Contempt finding violated the automatic stay. The Bankruptcy Court also found the wage garnishment order and the tax interception did not violate the stay. The Bankruptcy Appellate Panel found the medical expense was subject to the stay.

Mother appealed. The Court of Appeals held that, except for the contempt finding, the Family Court’s order did not violate the automatic stay because an exception applied. The Bankruptcy code’s automatic stay of other actions against the debtor does not apply to a civil action that is “for the establishment or modification of an order for domestic support obligations.” Domestic support obligations include debts established by a court that are “in the nature of” maintenance or support, “without regard to whether such debt is expressly so designated.” Because the Family Court established a domestic support obligation by entering a judgment for the arrearage, altered Mother’s wage withholding, and clarified the amount of outstanding expenses, the Family Court’s acts were tailored to the stay exceptions. The contempt portion of the Family Court’s hearing was a violation of the automatic stay, however, this was not contested. Finally, the Court of Appeals did not make a finding on whether Father’s request for reimbursement of medical expenses violated the automatic stay because it did not change the Court’s calculation of Mother’s actual damages.

Emily T. Cecconi

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