In re Hutchens, 9:09–bk–15750–JPH.

• Decision Date: 04 October 2012
• Docket Number: No. 9:09–bk–15750–JPH.,9:09–bk–15750–JPH.
• Citation: 480 B.R. 374
• Parties: In re William David HUTCHENS, Debtor.
• Court: U.S. Bankruptcy Court — Middle District of Florida

480 B.R. 374

In re William David HUTCHENS, Debtor.

No. 9:09–bk–15750–JPH.

United States Bankruptcy Court,

M.D. Florida,

Fort Myers Divison.

Oct. 4, 2012.

Christian B. Felden, Felden and Felden, Naples, FL, for Debtors.

MEMORANDUM OF DECISION VACATING ORDER TO SHOW CAUSE AND DETERMINING THE STATUS OF CERTAIN DOMESTIC SUPPORT OBLIGATIONS AND A PROPERTY DIVISION AND DENYING MOTION TO DISMISS

JEFFERY P. HOPKINS, Bankruptcy Judge.

Before the Court are two matters for consideration: an Order to Show Cause (“Show Cause Order”) (Doc. 63) predicated on a motion (Doc. 62) filed by the Debtor, William Hutchens (hereinafter “the Debtor”),and the Motion to Dismiss for Failure to Comply with Order Confirming Plan (“Motion to Dismiss”) (Doc. 68) filed by Janet Hutchens (“Janet”). On April 11, 2012, the Court held an evidentiary hearing on both motions. At the close of the hearing, the Court found that a technical violation of the order confirming the plan had occurred, but denied any monetary relief to the Debtor.¹ In order to resolve the parties' remaining dispute, the Court will need to address the following issues: 1) whether a $78,000 claim represents the entire domestic support obligation, as that term is currently defined under § 101(14A); 2) whether a domestic support obligation, not provided for by the plan, survives a Chapter 13 discharge, and if the obligation survives, does interest accrue on the unpaid portion; 3) whether recent postpetition contempt proceedings Janet initiated against the Debtor in a New Hampshire court to collect a domestic support obligation, not being paid under the plan, falls under BAPCPA's new exceptions to the automatic stay under § 362(b)(2)(B) and (C); 4) whether a property division ordered in the state court is dischargeable under § 1328(a); and 5) whether the Debtor's Chapter 13 case should be dismissed under § 1307(c)(6) or (11) for a material default or failure to pay a domestic support obligation that first becomes due after the petition date.

I. Overview

Janet is the former spouse of the Debtor. She also is the holder of two of the largest claims against the Debtor and this bankruptcy estate. Both claims were incurred, in 2002, in the course of divorce proceedings in a New Hampshire domestic relations court. The largest claim Janet holds is for a property settlement. All general unsecured creditors, including Janet's property settlement claim, are to receive $0 under the plan. Janet's other claim is for a domestic support obligation. The domestic support obligation can be divided into two categories, one for payment of an ongoing support obligation until the parties' youngest child reaches the age of 18 and the other for payment of prepetition alimony and child support arrearages. Under the confirmed plan, only $78,000 of a prepetition domestic support obligation has been provided for as a first priority claim. If the Debtor completes all plan payments, that portion of the claim will be paid in full. For whatever reason that may have existed at the time the plan was confirmed, the Debtor did not address nor provide payment for Janet's entire domestic support obligation claim. Prior to the bankruptcy filing, in certain post-divorce litigation that occurred in 2008, the Debtor was ordered by the New Hampshire court to (1) make ongoing child support payments, (2) to cure an alimony and child support arrearage, (3) to pay $14,004.06 in Janet's attorney's fees, and (4) to pay Janet $25,000 in interest as a sanction for not complying with that court's previous orders. The confirmed plan fails to mention or provide treatment for all of these obligations. The Debtor is current on all plan payments, but ceased making postpetition child support payments to Janet in June 2011. When the support payments stopped, Janet instituted contempt proceedings in the New Hampshire court and asked this Court to dismiss the bankruptcy case. In response, the Debtor asked that this Court impose sanctions against Janet for pursuing collection of prepetition claims in state court and that his bankruptcy case be allowed to proceed undisturbed. The confluence of these events has given rise to much confusion and to the disputes now requiring resolution by this Court.

This proceeding arises in a case referred to this Court by the Standing Order of Reference entered in this District and is determined to be a core proceeding pursuant to 28 U.S.C. § 157(b)(1), (b)(2)(A), (b)(2)(B), (b)(2)(I), (b)(2)(O) and § 1334(b). The Court is authorized to enter final judgment in this proceeding. The following constitutes the Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.

II. Factual Background

On April 18, 2002, the Debtor and Janet were divorced in a New Hampshire domestic relations court. The final divorce decree incorporated the parties' Permanent Stipulation and Uniform Support Order which allocated the property division. The Permanent Stipulation and Uniform Support Order also provided Janet with alimony and child support payments for the couple's minor children, among other items. See attachment to Janet Hutchens' Deposition (Doc. No. 114).

Under the terms of the Permanent Stipulation, the Debtor was ordered to pay alimony of $5,000 per month beginning on May 1, 2002, for a period of six (6) years or until Janet remarried. See Paragraph 9 of Permanent Stipulation. With respect to child support, Paragraph 4 of the Permanent Stipulation provides as follows:

4. Uniform Support Order:

A Uniform Support Order is attached hereto and incorporated herein by reference. William [the Debtor] shall pay child support in the amount of Nine Thousand Dollars ($9,000.00) per month beginning on May 1, 2002. The guidelines are not applicable in this case due to the high income of the parties and the property settlement and alimony provisions hereunder. There will not be an automatic three (3) year review. Said review shall be deferred until 2008.

* * *

The Uniform Support Order referenced by the Permanent Stipulation also provides:

4. Obligor [the Debtor] is ORDERED to PAY THE FOLLOWING AMOUNTS:

CHILD SUPPORT:$2,646.00 per month

Arrearage of $____ as of see # 16

SPOUSAL SUPPORT (ALIMONY):$2,000.00 per month

Arrearage of $____ as of see # 16

Uninsured medical expenses shall be paid in the following percentage amounts:

Obligor 50% Obligee 50% Other ____%

Lastly, paragraph 16 of the Uniform Support Order states:

16. Variation to standing order (specify paragraph # ), additional agreement or order of the court:

Petitioner [the Debtor] shall make monthly additional payments of $500.00 to be applied first to child support arrearages, and the alimony arrearages. Petitioner's total monthly support obligation is $5,146.00.

See Attachment to Janet Hutchens' Deposition (Doc. No. 114).

Six years after the parties' divorce, in 2008, they were back before the New Hampshire court. At the 2008 hearings, Janet asserted that the Debtor had violated the terms of the divorce decree and should be held in contempt for nonpayment of alimony, child support, and the property settlement ordered by that court. During those proceedings, the New Hampshire court also conducted a review of the current financial circumstances of the parties to determine whether the alimony and child support payments (provided in Paragraph 4 of the Permanent Stipulation incorporated by reference in the divorce decree) should be modified.

On July 18, 2008, the New Hampshire court issued an order (the “July 2008 Order”) addressing the matters raised at the contempt hearings. In the July 2008 Order, the state court determined that the Debtor had a present obligation to Janet totaling $466,750. Specifically, the July 2008 Order stated that the Debtor owed Janet $49,072 for unpaid alimony, $340,250 for unpaid property settlement installment payments, $3,200 for his 50% share of uninsured medical expenses, $28,259 to reimburse Janet for 90% of the cost of their son's ACL surgery because of his failure to maintain health insurance for the minor children, $15,977 to reimburse Janet for college expenses, $25,000 as interest to sanction the Debtor for not making payments to Janet as previously ordered, and $4,992 in child support arrearages.

The July 2008 Order also set forth a payment schedule for the Debtor to cure his arrearage and for making ongoing child support payments. Pursuant to the July 2008 Order, the Debtor was to make a $50,000 payment within 90 days of the order being entered and to then make monthly payments in the amount of $5,500 until the $466,750 arrearage was cured. The July 2008 Order further broke down the $5,500 monthly payments. Importantly, it determined that $2,646 was the Debtor's ongoing child support payments and $2,854 would be applied to the $466,750 arrearage. When the Debtor's child support obligation ended, the July 2008 Order required him to continue paying $5,500 a month until the entire $466,750 arrearage was cured. The New Hampshire court held in abeyance any decision on Janet's request for attorney's fees until a later date. In a subsequent order issued in October 2008 (the “October 2008 Order”), the New Hampshire court also directed the Debtor to pay Janet $14,004.06 in attorney's fees in addition to the $466,750 arrearage.

Sometime after the New Hampshire court issued the July and October 2008 Orders, the Debtor had a conversation with Janet informing her that, because of a significant decline in his financial circumstances, he could not afford the $5,500 monthly payments. The parties then agreed orally that the Debtor could make monthly payments in an amount less than $5,500 without Janet waiving the deficiency for the full amount. The amount agreed upon by the parties was $3,000 per month. After their conversation, the Debtor began making minimum payments of $3,000 each month. On at least seven occasions before filing for bankruptcy, the Debtor made payments to Janet in an...