by Where the debtor’s plan provided for repayment of child support arrearage inside the plan, the Florida Department of Revenue was precluded from post-confirmation garnishing of the debtor’s wages in connection with that debt. Dempsey v. Fla Dept. of Rev., No. 16-328 (E.D. Tenn. June 20, 2017).
Kenneth Dempsey’s confirmed chapter 13 plan provided, “Miami Dade Child Support – Arrearage Child Support to be paid in full inside the plan.” Notwithstanding its knowledge of Mr. Dempsey’s bankruptcy and his treatment of the arrearage in his plan, the Florida Department of Revenue began garnishing Mr. Dempsey’s wages. Mr. Dempsey filed a motion for contempt. The bankruptcy court ordered the FDOR to cease its garnishments, refund any amounts it had collected but not yet disbursed, and reduce its claim in the bankruptcy by the amount it had garnished and disbursed. It declined to find the FDOR in contempt, however. The parties filed cross-appeals.
On appeal, the FDOR argued that the confirmation order did not preclude its efforts outside the plan to collect the arrearage because domestic support obligations are treated differently than other debts under BAPCPA. Mr. Dempsey countered that the FDOR’s collection outside the plan was not only prohibited but should have been held to be in contempt of the confirmation order.
Affirming the bankruptcy court in its entirety, the district court found guidance in the factually comparable case of In re Gonzalez, 832 F.3d 1251 (11th Cir. 2016). In Gonzalez, the Eleventh Circuit found that the BAPCPA exception to the automatic stay for domestic support obligations, section 362(b)(2), does not permit the Department to seek recovery of child support arrearages outside of a plan that provides for that debt. For the reasons stated in Gonzalez, the district court here found that confirmation of Mr. Dempsey’s plan precluded the action taken by the FDOR.
Applying the abuse-of-discretion standard to the bankruptcy court’s denial of a contempt order, however, the court found no reason to disturb that court’s decision. At the time the bankruptcy court rendered its decision, Gonzalez had not yet been decided and the law was not clear as to the legitimacy of the FDOR’s actions. The fact that in Gonzalez the Eleventh Circuit upheld the bankruptcy court’s finding of contempt did not persuade the court otherwise as the two cases came to the appellate courts in different procedural postures.