In re Howell, Bankruptcy No. 380-00072.
| Decision Date | 28 March 1980 |
| Docket Number | Bankruptcy No. 380-00072. |
| Citation | 4 BR 102 |
| Parties | In re John Lewis HOWELL, Jettie Darlene Howell, Debtors. |
| Court | U.S. Bankruptcy Court — Middle District of Tennessee |
Harry D. Lewis, Nashville, Tenn., for Debtor.
Hal. D. Hardin, U.S. Atty., Middle District of Tenn., Nashville, Tenn., for Department of Labor.
John P. Garner, U.S. Dept. of Labor, Nashville, Tenn., for Department of Labor.
Keith M. Lundin, Waddey & Lundin, Nashville, Tenn., Trustee in Bankruptcy.
John P. Garner, Atty., Nashville, Tenn., for Dept. of Labor Robert Washko, Asst. U.S. Atty.
This matter is before the Court upon action by the Department of Labor, (hereinafter Department), for relief from the stay provisions of 11 U.S.C. § 362; for relief from order directing payment to the Trustee of monies to fund the Chapter 13 plan; and objection to confirmation of the proposed plan. The debtors have filed a motion to modify the Chapter 13 plan to change the classification of the claim of the Department from unsecured status to secured status with full payment of the claim through the plan over the three year duration of the plan.
The issues to be considered are (1) the authority of the court under Chapter 13 to order the Department of Labor to make monthly payroll deductions from the debtor's disability payments; and (2) the classification of the Department's claim for recovery of overpayments made to the debtor.
The debtor is presently receiving 100% disability payments from the Department pursuant to the Federal Employees' Compensation Act (FECA). 5 U.S.C. § 8101, et seq. The debtor was employed by the Tennessee Valley Authority (T.V.A.). During the course of the employment he became disabled and began receiving payments under the FECA. Subsequently the debtor returned to work with the T.V.A. but apparently continued to receive disability benefits. Complete disability was again experienced by the debtor. Pursuant to 5 U.S.C. § 8129(a)1 a determination of overpayment was made and pursuant to regulations it was determined that $400 monthly should be withheld from debtor's monthly disability benefits. Debtor receives approximately $1,100 a month as 100% disability benefits.
It is the position of the Department that exclusive jurisdiction is vested in the Department to determine disability, amount of payment, overpayment, rate of recoupment of any overpayment and any subsequent redetermination of disability. The rate of repayment of the overpayment is more fully discussed herein. However, initially it should be noted the court does not read the stay provisions of 11 U.S.C. § 362 to operate to interfere with its Congressionally imposed duties as to determination of disability or any subsequent reevaluation of disability. The regulations of the Department as to procedures for periodic reexamination or whatever to consider whether the disability of the individual has changed will not be stayed by 11 U.S.C. § 362. That provision, although the statutory language is extremely broadly drawn, is primarily concerned with creditor action. It should not be interpreted to affect such determinations. Congress did not so intend.
The Court does not have before it whether the stay applies as to the determination of the amount of overpayment. That has already been determined. Debtor suggests in the motion to modify the plan that an administrative rehearing will be sought by the debtor of the amount of overpayment including whether the amount should be excused under 5 U.S.C. § 8129(b).2 Certainly, if the stay is applicable, relief is appropriate as Congress provides for such matters to be determined administratively and has established the machinery in the Department for establishing overpayments and presumably any reconsideration, if such is deemed appropriate. This Court does not seek to venture into the areas of the Department's Congressionally recognized administration expertise.
For reasons now stated, the Court does hold that Congress has determined the Bankruptcy Court has jurisdiction as to a claim by the Department against the debtor for overpayment and as to the debtor's income under the FECA.
The Department of Labor is an "entity" subject to the income deduction orders of a United States Bankruptcy Court in a Chapter 13 proceeding. Section 1325(b) of the Code states that after confirmation of a Chapter 13 plan ". . . the court may order any entity from whom the debtor receives income to pay all or any part of such income to the trustee." 11 U.S.C. § 1325(b). "Entity" is defined in § 101(14) of the Code as follows: ". . . `entity' includes person, estate, trust, governmental unit;." 11 U.S.C. § 101(14). ". . . `Governmental unit' in § 101(14) is further defined in § 101(21) as follows: ". . . `governmental unit' means . . . department, agency, or instrumentality of the United States, . . .." 11 U.S.C. § 101(21). The Department is a "governmental unit" under § 101(21) and, therefore, is an "entity" under § 101(14).
The definition of "entity" in § 101(14) should be contrasted with the definition of person in § 101(30). Entity includes governmental units, while person does not. The Code carefully uses these terms. For example, note their use in § 109(b) and (c). Congress chose the word in § 1325(b) and intended to include governmental units. Section 1325(b) thus subjects the Department to orders of the Bankruptcy Court requiring the payment of a debtor's income to the Trustee in Chapter 13 cases.
The expanded jurisdictional provisions of the Code make it clear that the Department and other government units are subject to income deduction orders in Chapter 13 cases. If 11 U.S.C. § 1325(b) is not itself sufficient authority to support the income deduction order herein, there can be no doubt that § 105(a) of the Code and §§ 1471(a) and (e) of Title 28 of the United States Code give the Court authority to issue the challenged orders. 11 U.S.C. § 105(a) reads in full as follows:
(a) the bankruptcy court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.
Section 105(a) is an intentionally broad grant of authority to the United States Bankruptcy Courts to facilitate the orderly administration of bankruptcy cases. This section is much broader than its predecessor, § 2A(15) of the prior Act. Unlike the restriction under prior law that an order of a bankruptcy court must be "necessary for the enforcement of the provisions of this title," § 105 authorizes the bankruptcy court to also issue orders "appropriate to carry out the provisions of this title." The power contained in § 105 is arguably more extensive than that contained in All Writs Statute, 28 U.S.C. § 1651.
Section 105 complements the all encompassing grant of jurisdiction now contained in 28 U.S.C. § 1471, which provides in part:
(e) the bankruptcy court in which a case under Title 11 is commenced shall have exclusive jurisdiction of all of the property, whereever located, of the debtor, as of the commencement of such case.
As outlined below, the debtor's right to receive disability benefits is property of the Chapter 13 estate. Such property is unquestionably within the jurisdiction of the United States Bankruptcy Court. Section 105(a) authorizes the Bankruptcy Court to issue orders "necessary and appropriate" to carrying out the provisions of the Chapter 13 plan. The plan herein calls for the payment of disability benefits to the Trustee for distribution to creditors.
The Department cannot claim the immunity from income deduction orders which may have been available under prior law. As demonstrated in United States v. Krakover, 377 F.2d 104 (10th Cir. 1967), agencies of the United States government had realized some insulation from income deduction orders in Chapter 13 cases under prior law. In Krakover the 10th Circuit reasoned that § 658(2) of the prior Bankruptcy Act, 11 U.S.C. § 1058(2), limited the enforceability of income deduction orders in Chapter 13 cases to an "employer" other than the United States government. The language of § 1325(b) of the Code and the definitions contained in § 101 clearly overrule the immunity analysis in Krakover.
Moreover, 11 U.S.C. § 106 specifically addresses the immunity issue as follows:
Congress, thus, contemplated a waiver of the principle of sovereign immunity of the United States at least to the extent of subjecting government agencies to income deduction orders as "entities" under § 1325(b).
Congress contemplated that individuals receiving disability income could be debtors under Chapter 13 of the new Bankruptcy Code. An "individual with regular income" who otherwise meets the requirements of § 109(e) of the Code is eligible to be a debtor under Chapter 13. 11 U.S.C. § 109(e). Section 101(24) of the Code defines "individual with regular income" to mean:
". . . an individual whose income is sufficiently stable and regular to enable such individual to make payments under a plan under chapter 13 of this title . . ." 11 U.S.C. § 101(24).
The legislative history of § 101(24) reveals that Congress presupposed the use of disability benefits as income "sufficiently stable and regular" to provide funding for a Chapter 13 plan. The House Report relating to § 101(24) contains the following observation:
"Thus, individuals on welfare, social security, fixed pension incomes, or who live on investment incomes, will be able to work out repayment plans with their creditors rather than being forced into straight bankruptcy." H.R.Rep.No.95-595, 95th Cong., 1st Sess. at 312 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6269.
See, S.Rep.No.95-989, 95th Cong., 2d Sess. 24, 119, 312 (1978). See also, 2...
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