State Held in Contempt for Attempting to Collect Past-Due Child Support

The United States Supreme Court has denied certiorari on an Eleventh Circuit Court of Appeals ruling which found the State of Florida in contempt of a bankruptcy court’s confirmation order. In re Rodriguez, 367 F. App’x. 25 (11th Cir. 2010) cert. denied, 131 S. Ct. 128 (U.S. 2010). In Rodriguez, the Florida Department of Revenue (“DOR”) appealed a district court order which affirmed a bankruptcy court order holding the State of Florida in contempt for sending debt-collection letters to Rodriguez after Rodriguez filed for Chapter 13 bankruptcy and had his Chapter 13 plan confirmed. During the course of the bankruptcy, the DOR, acting in its capacity as a Child Support Collections Agency, sent three letters to Rodriguez. In response to these letters, Rodriguez filed a motion for contempt against the State in the Bankruptcy Court claiming that the letters violated the automatic stay provision of the bankruptcy code and seeking attorney’s fees and punitive damages.

After a hearing on the matter, the Bankruptcy Court concluded that the State’s actions violated the automatic stay and granted Rodriguez’s motion for contempt. On appeal, the District Court disagreed with the Bankruptcy Court’s finding that the State violated the automatic stay. Nonetheless, the District Court found that the State violated the terms of the debtor’s confirmed plan and therefore found that the Bankruptcy Court did not commit error in finding the State in contempt and awarding attorney’s fees . Id. at 27.

In holding that the State did not violate the automatic stay, the District Court looked to § 362(b)(2)(B), which excepts from the automatic stay “the collection of a domestic support obligation from property that is not property of the estate.” Id. The District Court found the 362(b)(2)(B) exception applied in the Rodriguez case because, pursuant to 11 U.S.C. § 1327(b), after Rodriguez’s plan was confirmed by the Bankruptcy Court, all of Rodriguez’s property not necessary to fulfill the requirements of the plan was revested with Rodriguez personally as a matter of law. Id. citing, 11 U.S.C. § 1327(b); Telfair v. First Union Mortgage Corporation, 216 F.3d 1333, 1340 (11th Cir. 2000). Therefore, the District Court held, subsequent to confirmation, the property was “not property of the estate” and subject to the § 362(b)(2)(B) child support exception. Id. at 27. Accordingly, the District Court found that the State did not violate the automatic stay provision of § 362(a). In affirming the District Court, the Eleventh Circuit agreed that the State violated the terms of Rodriguez’ confirmed plan and, therefore, the Bankruptcy Court’s finding of contempt and award of attorney’s fees was appropriate. Id. at 30

In agreeing with the lower court’s finding of contempt, the Eleventh Circuit considered 11 U.S.C § 1327 which addresses the effects of the confirmation of a bankruptcy plan. § 1327 provides in part:

(a) The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan. 11 U.S.C. § 1327(a)

The Eleventh Circuit found that under the provisions of 11 U.S.C. § 1327(a), once a bankruptcy plan is confirmed, the debtor and each creditor are bound by its terms. Accordingly, the State violated the confirmation order by asserting an interest other than those provided for in the plan after confirmation and therefore the bankruptcy court did not err in granting Rodriguez’ motion for contempt. Id. at 28 citing, In re Gellington, 363 B.R. 497, 502 (Bankr. N.D. Tex.2007).

Finally, in response to the State’s argument that the Eleventh Amendment immunity protects it from liability, the Eleventh Circuit agreed with the District Court’s rejection of this argument and held that once the State filed its proof of claim , pursuant to 11 U.S.C. § 106(b), it waived its sovereign immunity as a matter of law. Id. at 29.

The Bankruptcy Court did not address the issue of a violation of the confirmed chapter 13 plan in its Order Granting Debtor’s Motion for Contempt. This issue appears to have been raised for the first time at District Court level.

The State of Florida filed a Proof of Claim in the amount of $7,686.06, representing Rodriguez’ pre-petition child support delinquencies.