Rivera v. Orange County Probation Dep’t (In re Rivera), Case No. CC-13-1476-PaKiLa, ___BR___ (9th Cir. BAP June 4, 2014)
Rivera v. Orange County Probation Dep’t (In re Rivera), Case No. CC-13-1476-PaKiLa, ___BR___ (9th Cir. BAP June 4, 2014): Ninth Circuit Bankruptcy Appellate Panel held that amounts due to a county for food, clothing, and medical care for an incarcerated minor are nondischargeable "domestic support obligations" of the parents pursuant to 11 U.S.C. § 523(a)(5).
Facts and Procedural History:
The debtor’s minor son was incarcerated in Orange County from 2008 through 2010, for a total of 593 days. California law requires parents of an incarcerated minor to pay "costs of support" of the minor, which are limited to food, food preparation, clothing, personal supplies, and medical expenses, not to exceed $30 per day. Cal. Welf. & Inst. Code § 903(a).
Orange County calculated the total cost of incarceration to be $420 per day, but charged the debtor only $23.90 per day for the allowed support items in accordance with the statute. Orange County also charged the debtor an additional $2,199 for the cost of legal representation pursuant to section of 901.1(a) of the California Welfare & Institutions Code.
The debtor paid Orange County $9,508.60 in May 2010. On July 20, 2011, the Juvenile Court entered judgment against the debtor and her husband for the balance of $9,905.40, which included the unpaid costs of support and the legal expenses.
The debtor filed a voluntary petition for relief under Chapter 7 on September 12, 2011. The debtor listed Orange County as a priority, unsecured creditor, but the case was a no-asset case. Following the entry of the discharge, Orange County resumed collection efforts.
The debtor filed a motion to issue an Order Show Cause for why Orange County should not be held in contempt for violation of the discharge injunction. The bankruptcy court initially sided with the debtor over the meaning of sections 101(14A) (defining the term "domestic support obligation") and 523(a)(5) of the Bankruptcy Code, but ultimately ruled in favor of Orange County. The debtor appealed.
The Ninth Circuit Bankruptcy Appellate Panel’s Ruling and Reasoning:
The Ninth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court’s ruling. In so doing, the Panel compared the pre-Bankruptcy Abuse and Consumer Protection Act ("BAPCPA") language in section 101(14A) and the new post-BAPCPA language. The Panel noted that pre-BAPCPA, the statute only encompassed debts owed to a "spouse, former, spouse, or child of the debtor . . ." but now the statute contained new categories of possible creditors such as the child’s "parent, legal guardian, or responsible relative, or (ii) a governmental unit." Hence, governmental entities could assert nondischargeable claims.
The debtor argued the debt was not a "domestic support obligation" because it was not in the nature of "alimony, maintenance, or support." The Panel rejected this argument determining that the narrow category of expenses recoverable under the California statute (i.e., food, food preparation, clothing, and medical expenses) were quintessentially support expenses.
The Panel declined to rule on the dischargeability of the legal expenses as the debtor failed to challenge them, but stated in dicta that the fees would be discharged.
Commentary:
One could certainly argue that the addition of "governmental unit" to the list of potential "domestic support obligation" beneficiaries under section 101(14A) was intended to encompass family support reimbursement obligations formerly listed within section 523(a)(18), rather than a significant expansion of the support exception, as determined in this case.
Former section 523(a)(18) specifically allowed "governmental units" to pursue support enforcement claims where the state paid public assistance to the debtor’s dependents. This exception is now within the language of 523(a)(5) and 101(14A), rather than a separate section. Further, the definition at section 101(14A)(B) includes a qualifier in describing a domestic support obligation: "alimony, maintenance or support (including assistance provided by a governmental unit)." (Emphasis added).
However, the statutory language supports the outcome here. California’s statute governing the obligation to reimburse the State for costs narrowly limits the category of expenses for which the State can seek reimbursement, and they are, as the Panel emphasized, "quintessentially" support expenses.
This analysis is from the California State Bar Business Law Section’s Insolvency Law Committee e-newsletter of 9/25/14