Oregon v. Hickey (In re Hickey)
| Decision Date | 10 May 2012 |
| Docket Number | Adversary Proceeding No. 11-06204-fra,Bankruptcy Case No. 11-62694-fra7,Adversary Proceeding No. 11-06206-fra,Bankruptcy Case No. 11-63252-fra7 |
| Court | U.S. Bankruptcy Court — District of Oregon |
| Parties | IN RE CHRISTIAN PATRICK JOHN HICKEY and CHRISTINE ANN HICKEY, Debtors. STATE OF OREGON, DHS, Plaintiff, v. CHRISTIAN PATRICK JOHN HICKEY and CHRISTINE ANN HICKEY, Defendants. IN RE LOUANNE SCUDDER, Debtor. STATE OF OREGN, DHS, Plaintiff, v. LOUANNE SCUDDER, Defendant. |
In these matters, the State of Oregon filed a complaint seeking to except from discharge the Debtors'obligation under Oregon law to refund overpayments of food stamp or public assistance benefits occasioned by the Debtors' unlawful failure to report income. The State is entitled to recover from the Debtors public assistance obtained unlawfully. ORS 11.620. Pursuant to that provision the State initiated an administrative proceeding which resulted in the liquidation of the State's claim and issuance of a distraint warrant.
The State's complaint set out two grounds for exception from discharge. First, the State alleges that the Debtors' failure not to report income in order to obtain public assistance to which the Debtors were not entitled, constituted fraud under 11 U.S.C. § 523(a)(2)1 . Second, the State claims that the Debtors' obligation to repay the unlawfully obtained public assistance constitutes a domestic support obligation, and is therefore excepted from discharge under Code § 523(a)(5).
The Defendants did not appear, and a default order was entered. The State tendered a form of judgment relying on both causes of action. At that point the Court baulked, advising that it did not believe that the duty to repay was a domestic support obligation, and advised that a written opinion would follow.
Prior to amendment in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Code § 523(a)(5) read as follows:
Beginning with the effective date of BAPCPA in 2005, Code § 523(a)(5) was amended to except from discharge a debt "for a domestic support obligation." A domestic support obligation (DSO) is defined at Code § 101(14A) as a debt:
There is no doubt that the State's claim is owed to a governmental unit, or that it was established by applicable non-bankruptcy law prior to the date of the Debtors' petition for relief. No one has asserted that the claim has been assigned to a nongovernmental entity. The question is whether the debt is "in the nature of alimony, maintenance, or support" as defined for purposes of § 101(14A). The State points to several opinions wherein the court held that such debts are in the nature of support: Wisc. Dept. of Workforce Development v. Radliff (E.D. Wisc. 2008) (overpayment of food stamp benefits in the nature of support for purposes of § 101(14A)); In re Anderson, 439 B.R. 206 (Bankr. M.D.Ala. 2010) (Same); In re Wheeler, 2010 WL 503112 (Bankr. N.D.Ala. 2010 (Same).
Other courts have held that a debt for the overpayment of a support benefit is not in the "nature of support"; rather, it is for a return of money that should never have been paid to the recipient. In reKloeppner, 460 B.R. 759, 762 (D. Minn. 2011) (); See also, Taylor v. Taylor (In re Taylor), 455 B.R. 799 (Bankr. D.New Mexico 2011) (); In re Lutzke, 223 B.R. 552, 554-55 (Bankr. D.Or. 1998) ().
Under the old definition of Code § 523(a)(5), it was clear that the debt to be excepted from discharge must be to "a spouse, former spouse, or child of the debtor" and for the "support of such spouse or child." It was also clear, by negative implication in § 523(a)(5)(A), that the debt could be one that had been assigned to a federal or state agency. The new definition of domestic support obligation makes it clear that the debt can be one held by a "governmental unit," but it also provides at § 101(14A)(B) that even if held by a governmental unit, the debt must for the support of "such spouse, former spouse, or child of the debtor or such child's parent." While § 523(a)(5) may have been amended by BAPCPA, the changes did not change the standard for whether a debt or obligation is in the nature of support. Stover v. Phegley (In re Phegley), 443 B.R. 154, 157 (8th Cir. BAP 2011); In re Nelson, 451 B.R. 918, 921(Bankr. D.Or. 2011). Whether an obligation is in the nature of support and thus qualifies as support under bankruptcy law is a question of federal law. Friedkin v. Sternberg (In re Sternberg), 85 F.3d 1400, 1405 (9th Cir. 1996), overruled on other grounds, Murray v. Bammer (In re Bammer), 131 F.3d 788 (9th Cir. 1997). Whether an obligation is in the nature of support requires the court to look to the "substance of the obligation." Shaver v. Shaver, 736 F.2d 1314, 1316 (9th Cir. 1984).
The debt to the State for the overpayment of benefits is not for support of debtor's spouse, former spouse, or child of the debtor or such child's parent. Rather, it is a debt for the return of a benefit paid to theDebtor which should not have been paid in the first place. As such, the overpayment debt does not constitute a domestic support obligation for purposes of Code § 523(a)(5).2
Code § 523(a)(2) states:
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