I have previously written about automatic stay in Chapter 7 Bankruptcy and Chapter 13 Bankruptcy, and divorce, and domestic support obligations. While divorce is handled in the New York State Supreme Court, once in a while, a family court petition seeking child support or spousal support is filed against one of my bankruptcy clients in New York State Family Court. When this happens, usually I am asked whether the automatic stay prevent the filing or continuation of the family court proceedings. My answer to that question will depend on the type of bankruptcy filed.
While the debtors tend to believe that the automatic stay prevents creditors from proceeding with collection activities, it does not stop most family court matters. The Automatic Stay, in Chapter 7 Bankruptcy, which is governed by §362(a) of the Bankruptcy Code, will terminate any collection activities. However, one of the exemption included in §362(b) allows for actions in Family Court matters and also in Supreme Court involving domestic support obligations.
Specifically, Bankruptcy Code §362(b)(2)(A)(ii) provides:
The Automatic Stay created by a bankruptcy filing bars the commencement or continuation of most legal proceedings, but it has no effect on a proceeding for –
the establishment of paternity,
the establishment or modification of an order for a Domestic Support Obligation such as child support,
the determination of child custody or visitation issues, or
the dissolution of marriage, except to the extent that such proceeding may seek to determine a division of marital property in which the bankruptcy estate also has an interest.
While the divorce can be granted in Supreme Court without first obtaining relief from the Automatic Stay, the marital property cannot be divided without obtaining such relief. The Automatic Stay also does not prevent the post-petition collection of Domestic Support Obligations such as alimony or child support.
from any property belonging to the debtor, providing that the bankruptcy estate does not also have an interest in said property,
from automatic wage deduction orders created by a statute or judicial or administrative order,
from the interception of debtor’s federal or state income tax refunds, or
from the withholding, suspension or restriction of a debtor’s driver’s license or professional or occupational license.
Thus, there is no protection in bankruptcy court from the obligations imposed by a Domestic Support Obligation which can be brought in either the Family Court or Supreme Court. The above is true with respect to Chapter 7 Bankruptcy, however, in Chapter 13 Bankruptcy the answer is not the same.
The reason for this is the way Chapter 13 Bankruptcy treats debtor’s earnings after the filing of the bankruptcy petition. The property of the Chapter 13 Bankruptcy estate, which is broadly defined, specifically includes “earnings”. See 11 U.S.C. §541 [a] ; §1306 [a]. Because payments to creditors must come from the debtor’s post-petition earnings, those earning are property of the Chapter 13 estate pursuant to 11 U.S.C. §1306 [a] . Thus, the claimant seeking to collect arrearages in support obligations is not free to pursue the Chapter 13 debtor’s post-petition earnings in Family Court.
If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.