Thomas Arthur Phillips and Deborah Ann Phillips

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re
THOMAS ARTHUR PHILLIPS
DEBORAH ANN PHILLIPS
Debtors
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:
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Case No. 05-14918
Chapter 7
Judge Hopkins
ORDER HOLDING IN ABEYANCE
MOTIONS FOR DECLARATION OF INAPPLICABILITY OF AUTOMATIC STAY
UNTIL DETERMINATION OF DISCHARGEABILITY OF UNDERLYING DEBT
PURSUANT TO 11 U.S.C. § 523(a)(5)
Presently before the Court are two motions filed by Mary Beth Masimore ("Masimore"),
the former wife of Debtor Thomas Phillips. See Docs. 31 & 35. Masimore seeks a
determination, pursuant to 11 U.S.C. § 362(b)(2), that the automatic stay does not apply to her
state court efforts to enforce and collect a prepetition claim arising from: (1) the parties'
divorce decree; and (2) a stipulated order precipitated by Masimore's attempt to enforce the
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: December 05, 2005
____________________________________________________________
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Case No. 05-14918
1 Although styled as motions for relief from stay, they are not. Motions for relief from stay are
brought under 11 U.S.C. § 362(d) and seek to modify the effect of a stay which the movant
otherwise admits is applicable.
2 The Debtors also argue that even if the debt represents child support, and even if state law
provides that individual retirement accounts ("IRA's") are not exempt for purposes of child
support, Masimore can no longer proceed in state court against Mr. Phillip's IRA's because
they are now exempt as a result of the bankruptcy filing. The Debtors are incorrect. Section
522(c)(1) provides, in relevant part:
[P]roperty exempted under this section is not liable during or after the case
for any debt of the debtor that arose . . . before the commencement of the
case, except–
(1) a debt of a kind specified in section . . . 523(a)(5) of this
title[.]
11 U.S.C. § 522(c)(1).
2
terms of the divorce decree.1 More specifically, Masimore contends that the stay is
inapplicable because she is merely seeking to collect child support from non-estate property.
The Debtors oppose the motion, arguing that the Court cannot decide the § 362(b)(2) issue
until it is first determined whether the prepetition debt to Masimore is nondischargeable
pursuant to 11 U.S.C. § 523(a)(5).2
LAW
Section 362(b)(2) provides, in relevant part:
The filing of a petition . . . does not operate as a stay–
. . . .
(2) under subsection (a) of this section–
. . . .
(B) of the collection of alimony,
maintenance, or support from property that is not
property of the estate[.]
The question of law presented by the parties is whether the Court can declare the stay to be
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Case No. 05-14918
3 Section 523(a)(5) provides, in relevant part:
A discharge . . . does not discharge an individual debtor from any debt–
. . . .
(5) to a spouse, former spouse, or child of the debtor, for alimony to,
maintenance for, or support of such spouse or child, in connection with a
separation agreement, divorce decree or other order of a court of record,
determination made in accordance with State or territorial law by a
governmental unit, or property settlement agreement, but not to the extent
that–
. . . .
(B) such debt includes a liability designated as
alimony, maintenance, or support, unless such liability is
actually in the nature of alimony, maintenance, or support[.]
3
inapplicable pursuant to § 362(b)(2) prior to determining whether the prepetition marital debt
to Masimore arising from the divorce proceedings in state court is nondischargeable under
§ 523(a)(5).3 Masimore recently filed a complaint to determine dischargeability under §
523(a)(5) and/or (15), see Adv. No. 05-1184, thus opting for adjudication of those matters in
this Court as an adversary proceeding. Accordingly, the determination of whether the divorce
related debt is dischargeable will be governed under Rule 7001(6), even though, technically,
the state court had concurrent jurisdiction to decide the § 523(a)(5) claim.
Although there is a split of authority on the question, at least one court has concluded
that the applicability of § 362(b)(2) cannot be resolved until there is a determination under §
523(a)(5). See In re Sutton, 250 B.R. 771, 774-75 (Bankr. S.D. Fla. 2000); but see Montoya
v. Vigil (In re Vigil), 250 B.R. 394 (Bankr. D.N.M. 2000). According to Sutton, "[a]lthough §
362(b)(2)(B) does not specifically reference § 523(a)(5), it is obvious, both logically and from
the legislative history, that Congress was only providing a stay exception to allow collection
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4 The legislative history concerning § 362(b)(2) provides:
The automatic stay is one means of protecting the debtor's discharge. Alimony, maintenance
and support obligations are excepted from discharge. Staying collection of them, when not
to the detriment of other creditors (because the collection effort is against property that is not
property of the estate), does not further that goal. Moreover, it could lead to hardship on the
part of the protected spouse or children.
S. Rep. No. 95-989, at 51 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5837.
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of non-dischargeable debts."4 In re Sutton, 250 B.R. 771 at 774-75. This Court believes that
the Sutton court takes the better reasoned approach and adopts the rationale expressed in
that case.
A ruling on the applicability of § 362(b)(2), prior to a determination under § 523(a)(5),
gives rise to a procedural dilemma concerning the preclusive effect of the § 362(b)(2) ruling
on the subsequent litigation under § 523(a)(5). See Vigil, 250 B.R. at 394 (creditor who
initially prevailed on motion under § 362(b)(2) argued that debtor was subsequently precluded
from contesting dischargeability of the debt in the § 523(a)(5) adversary proceeding under res
judicata and collateral estoppel principles). The party that prevails in the contested matter will
be inclined to argue that the § 362(b)(2) ruling precludes the other party from relitigating the
issue in the adversary proceeding under § 523(a)(5). To hold that the § 362(b)(2) ruling
precludes subsequent litigation under § 523(a)(5) conflicts with Fed. R. Bankr. P. 7001(6),
which mandates that the dischargeability of any debt be determined by adversary proceeding
as opposed to contested matter. On the other hand, to hold that the § 362(b)(2) ruling is not
preclusive in subsequent litigation under § 523(a)(5) leads to its own problems. If a court first
rules, in the contested matter, that § 362(b)(2) is applicable but later concludes, in the
adversary proceeding, that the debt is dischargeable pursuant to § 523(a)(5) or (15), then the
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Case No. 05-14918
5 At the hearing, the issue arose as to whether the Rooker-Feldman doctrine precluded this
Court from acting as an appellate court on issues already decided by the state courts. See
Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 125 S. Ct. 1517, 1521-22 (2005) (The Rooker-
Feldman doctrine . . . is confined to cases . . . brought by state-court losers complaining of
injuries caused by state-court judgments rendered before the [federal] court proceedings
commenced and inviting [federal] court review and rejection of those judgments). Rooker-
Feldman has no application to the instant matter because this Court is only deciding the stay
issue under § 362(b)(2) and the dischargeability issue under § 523(a), neither of which have
been addressed in the state court litigation between the parties.
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§ 362(b)(2) ruling will have served as authorization by the bankruptcy court for the creditor in
that case to collect on a dischargeable prepetition debt. Additionally, even if the creditor
prevails under § 523(a)(15) but not § 523(a)(5), the § 362(b)(2) ruling will have given the
creditor a head start in the race for non-estate assets among creditors holding co-equal
nondischargeable claims under § 523(a).
ANALYSIS
In general, an award for alimony, maintenance or support contained in an order or
divorce decree is not dischargeable in bankruptcy. See In re Sorah, 163 F.3d 397 (6th Cir.
1998). This Court, however, cannot make a proper determination under § 362(b)(2) until the
§ 523(a)(5) issue is resolved in Masimore's adversary proceeding.
Masimore has expressed concern that her adversary proceeding cannot resolve the
issues she seeks to litigate in state court, and thus only § 362(b)(2) relief provides her with
redress on the state court issues. Masimore is correct that her adversary proceeding will not
resolve her state court issues.5 Nonetheless, to avoid a potential procedural dilemma which
might waste judicial resources, and to preserve the integrity of the discharge of the debt at
issue, if warranted, the automatic stay precludes Masimore from further prosecution of her
prepetition claim in state court at this juncture. If nondischargeability under § 523(a)(5) is
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6 The motions will be held in abeyance, as opposed to denied without prejudice to refiling, so
that Masimore may receive immediate relief if § 523(a)(5) is applicable.
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established, then Masimore will be entitled to immediate relief under § 362(b)(2) to proceed
in state court.
CONCLUSION
For the foregoing reasons, the Court will hold the motions in abeyance until the
§ 523(a)(5) issue is resolved in the adversary proceeding.6 When the § 523(a)(5) ruling is
made, a contemporaneous order on the motions will be entered.
Copies to:
Thomas & Deborah Phillips
504 Park Place
Cincinnati, OH 45244
Robert A. Goering, Esq.
robertg@fuse.net
Robert A. McMahon, Esq.
bmcmahon@emh-law.com
E. Hanlin Bavely, Esq.
trusteebavely@zoomtown.com
U.S. Trustee
ustpregion09.ci.ecf@usdoj.gov
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