In re Jenkins

• Decision Date: 04 November 2019
• Docket Number: CASE NO. 19-80930-CRJ-7
• Citation: 608 B.R. 565
• Parties: In the MATTER OF: Craig Ashley JENKINS, SSN: XXX-XX-XXXX, Amber Joy Jenkins, SSN: XXX-XX-XXXX, Debtor(s).
• Court: U.S. Bankruptcy Court — Northern District of Alabama

608 B.R. 565

In the MATTER OF: Craig Ashley JENKINS, SSN: XXX-XX-XXXX, Amber Joy Jenkins, SSN: XXX-XX-XXXX, Debtor(s).

CASE NO. 19-80930-CRJ-7

United States Bankruptcy Court, N.D. Alabama, Northern Division.

Signed November 4, 2019

Kevin D. Heard, Heard, Ary & Dauro, LLC, Huntsville, AL, for Debtor.

MEMORANDUM OPINION ON ORDER TO SHOW CAUSE WHY DEFENDANT SHOULD NOT BE HELD IN CONTEMPT AND ON DEBTORS' MOTION FOR CONTEMPT CITATION AND SANCTIONS

Clifton R. Jessup, Jr., United States Bankruptcy Judge

This case came before the Court on September 4, 2019 upon Order Requiring the Jackson County Solid Waste Department to Show Cause Why Defendant Should not be Held in Contempt and Sanctions Imposed; Debtors' Motion for Contempt Citation and Sanctions, and on Amended Response to Motion for Contempt Citation and Sanctions. Appearances were made by Kevin D. Heard, Esq., counsel for the Debtors, and John F. Porter, III, Esq., counsel for the Jackson County Solid Waste Department (hereinafter the "Defendant" or "Jackson County").¹

During the hearing, the Defendant argued that it should not be held in contempt and sanctions should not be imposed because the Debtors' failure to pay for prepetition solid waste collection services constitutes a misdemeanor which is punishable by fine or penalty under the Solid Wastes and Recyclable Materials Management Act.² Accordingly, the Defendant argued that the debt was excepted from discharge pursuant to 11 U.S.C. § 523(a)(7) as a debt for a fine or penalty payable to a governmental unit.

The issue of dischargeability under § 523(a)(7) may be raised at any time because the requirement under Rule 4007(c) of the Federal Rules of Bankruptcy Procedure that a complaint to determine the dischargeability of a debt under 11 U.S.C. § 523(c)(1) must be filed within sixty days after the first date set for the § 341 Meeting of Creditors is limited on its face to debts obtained by false pretenses, fraud or defalcation, and willful and malicious injury under subsections 523(a)(2), (4) and (6). Debts which constitute a fine, penalty, or forfeiture for purposes of subsection 523(a)(7) are "automatically nondischargeable, under the general rule prescribed in the opening clause of § 523(a) (providing that a ‘discharge under section 727 of this title does not discharge an individual debtor from any debt’ listed in the paragraphs that follow)."³ Accordingly, the Court entered an Order Requiring Briefs on September 6, 2019, directing the parties to specifically address the issue of dischargeability under § 523(a)(7).⁴

The parties timely submitted their respective briefs on September 25, 2019 and the Court took the matter under advisement.⁵ The Court has now considered the pleadings and briefs, the undisputed facts, and the applicable law, and makes the following findings of fact and conclusions of law pursuant to Rules 7052 and 9014(c) of the Federal Rules of Bankruptcy Procedure.⁶

FINDINGS OF FACT AND CONCLUSIONS OF LAW

On March 25, 2019, the Debtors filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On Schedule E/F - Creditors Who Have Unsecured Claims, the Debtors listed Jackson County Solid Waste as an unsecured creditor in the amount of $1,000. Without objection from the Defendant, the Court entered the Debtors' discharge on July 8, 2019 which relieved the Debtors "from their personal liability on their discharged debts and generally barred creditors from taking actions to collect those debts."⁷ On July 23, 2019, the Court entered an Order closing the Debtors' Chapter 7 case.⁸

It is undisputed that three days later on July 26, 2019, Randy Haynes, an Enforcement Officer for Jackson County Solid Waste, appeared at the Debtors' home and left a business card stating, "arrest warrant pending for violation of solid waste laws..."⁹ On July 29, 2019, counsel for the Debtors took immediate action by filing a Motion for Contempt Citation and Sanctions pursuant to which the Debtors seek an order finding the Defendant in civil contempt for violating the discharge injunction issued by this Court. In its Amended Response to Motion for Contempt Citation and Sanctions, the Defendant states that although Jackson County has a right to pursue the collection of past due solid waste statements by civil action, the Defendant "has no intention of pursuing the collection of this debt by civil collection means and methods, and has made no effort to do so since becoming aware of the Bankruptcy Petition, after the Order of Discharge was entered."¹⁰

Pursuant to 11 U.S.C. § 524(a)(2), the discharge of a debt "operates as an injunction against ... an act ... to recover any debt as a personal liability of the debtor."¹¹ The discharge injunction "bars creditors from collecting any debt that has been discharged."¹² If a creditor violates the discharge injunction, a bankruptcy court may exercise its authority under 11 U.S.C. § 105(a) to "issue any order, process, or judgment that is necessary or appropriate to carry out" the injunction, including imposing civil contempt sanctions "to coerce the defendant into compliance."¹³

By barring any action to collect or recover a discharged debt as a personal liability of a debtor, the discharge injunction plays a vital "role in achieving the Bankruptcy Code's overall policy aim of giving a debtor a ‘fresh start.’ "¹⁴ In the case of Green Point Credit, LLC v. McLean (In re McLean) , the Eleventh Circuit examined the text of the statute, after finding the text to be ambiguous and reviewing its legislative history, the Court of Appeals joined "other circuits in concluding that § 524(a)(2) is an expansive provision designed to prevent any action that has the effect of pressuring a debtor to repay a discharged debt ..."¹⁵ The Court of Appeals explained the breadth of the discharge injunction, writing:

Legislative history demonstrates clearly that the purpose of the statute is to ‘eliminate any doubt concerning the effect of the discharge as a total prohibition on debt collection efforts.’ H.R. Rep. No. 95-595, at 365-66 (1977), as reprinted in 1978 U.S.C.C.A.N. 5963, 631. And Congress meant no doubt whatsoever: ‘[ Section 524 ] is intended to insure that once a debt is discharged, the debtor will not be pressured in any way to repay it. In effect, the discharge extinguishes the debt, and creditors may not attempt to avoid that.’ Id. at 366 (emphasis added).¹⁶

The Defendant argues that it is not barred by the discharge injunction in this case, neither presently nor in the future, from pursuing criminal charges against the Debtors because the prepetition debt for solid waste collection services was excepted from the Debtors' Chapter 7 discharge pursuant to 11 U.S.C. § 523(a)(7) under which a debt is excepted from discharge to the extent the debt is "for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not for compensation for actual pecuniary loss,"¹⁷ other than certain tax penalties which are inapplicable in this case.

Given the Bankruptcy "Code's basic purpose of ‘relieving the honest debtor from the weight of oppressive indebtedness and permitting him to start afresh, exceptions to discharge are to be construed narrowly. "¹⁸ Thus, for the debt at issue to be excepted from discharge under § 523(a)(7), the Defendant must establish by a preponderance of the evidence that the debt (i) is a ‘fine, penalty, or forfeiture,’ (ii) that is ‘payable to and for the benefit of a governmental unit,’ and (iii) that the debt is ‘not compensation for actual pecuniary loss.’¹⁹ There is no dispute that the Defendant, as a political subdivision of the State of Alabama, is a governmental unit for purposes of § 523(a)(7). There is a dispute regarding the other elements, however.

The Debtors argue that the prepetition debt owed to the Defendant for monthly solid waste collection services is not a debt based on a "fine, penalty, or forfeiture" for purposes of § 523(a)(7). Instead, the Debtors argue that the Defendant's primary purpose in seeking to collect the prepetition debt is not penal, but compensatory as the Defendant's reliance upon ALA. CODE § 22-27-1, et seq. demonstrates that the debt at issue is meant to reimburse the Defendant for the amount of the Debtors' prepetition bill for trash collection services which the Debtors were unable to pay prior to seeking bankruptcy relief.

The Defendant counters that the Debtors' failure to participate in Jackson County's mandatory Solid Waste Collection Program and to pay for the prepetition services provided by the Defendant, constitutes a "potential criminal misdemeanor punishable by fine" under Alabama law.²⁰ As explained by the Fifth Circuit in the case of Schaffer v. Louisiana State Board of Dentistry , for purposes of § 523(a)(7) " ‘[t]he definitions of penalty and fine reflect the traditional understanding of these terms as punitive or penal sanctions imposed for some form of wrongdoing.’ "²¹ While the statute at issue in Schaffer allowed the governing body to impose a fine in addition to costs, the State Board chose only to assess costs against the debtor during a dental license revocation proceeding. The Court of Appeals found that it did not necessarily follow that the costs imposed were a penalty under § 523(a)(7) because the exception "excludes from discharge only those [fines, penalties or] forfeitures imposed because of misconduct or wrongdoing by the debtor."²²

In this case, the Solid Wastes and Recyclable Materials Management Act authorizes the governing body of each county to adopt rules and regulations providing for mandatory public participation in and subscription to solid waste disposal services.²³ When a solid waste disposal account becomes delinquent, § 22-27-7 of the Code of Alabama permits the governing body to institute criminal proceedings against the delinquent party. The statute provides, in relevant, part as follows:

.... Any person violating any provision of this article or

...