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Dempsey v. Florida Department of Revenue

United States District Court, E.D. Tennessee, Chattanooga

June 20, 2017

KENNETH ANDREW DEMPSEY, Appellant/Cross-Appellee,
v.
FLORIDA DEPARTMENT OF REVENUE, Appellee/Cross-Appellant .

          CHRISTOPHER H. STEGER MAGISTRATE JUDGE

          MEMORANDUM OPINION

          TRAVIS R. MCDONOUGH UNITED STATES DISTRICT JUDGE

         Before the Court are cross-appeals filed by Debtor-Appellant Kenneth Andrew Dempsey and Creditor-Appellee the Florida Department of Revenue (the “Department”). (Doc. 1, at 1-2, 5-6.) Dempsey and the Department both appeal the bankruptcy court's order dated June 6, 2016, in which the bankruptcy court denied Dempsey's motion for contempt, but found that language in Dempsey's confirmed Chapter 13 plan foreclosed the Department's ability to collect child support arrearages outside of the payment terms specified in Dempsey's Chapter 13 plan. (Doc. 1, at 3-4.) For the reasons stated hereafter, the Court concludes that the bankruptcy court did not err, and its rulings will be AFFIRMED.

         I. STANDARD OF REVIEW

         In an appeal from a bankruptcy court, the Court must uphold the findings of fact made by the bankruptcy court unless such findings are clearly erroneous. In re Gardner, 360 F.3d 551, 557 (6th Cir. 2004). The Court reviews de novo the bankruptcy court's conclusions of law. Id. The Court has the authority to affirm, modify, or reverse a judgment or order of the bankruptcy court and may remand the case to the bankruptcy court for further proceedings. Fed.R.Bankr.P. 8013.

         II. FACTS AND PROCEDURAL HISTORY

         As referenced in the bankruptcy court's order dated June 6, 2016, the facts underlying this cross-appeal are largely undisputed. On May 16, 2014, the bankruptcy court confirmed Dempsey's Chapter 13 plan, which provides for payment in full of his child support arrearage. The confirmed Chapter 13 plan specifically provides: “Miami Dade Child Support - Arrearage Child Support to be paid in full inside the plan.” (Doc. 1-1, at 68.)

         On or around March 30, 2015, the Department issued a wage withholding order to Dempsey's employer in connection with his child support arrearage, which resulted in his employer withholding wages from his paycheck on multiple occasions. It is undisputed that the Department was aware of Dempsey's bankruptcy case and the bankruptcy court's Chapter 13 confirmation order when it issued the wage withholding order to Dempsey's employer.

         On May 9, 2016, Dempsey filed a motion for contempt, arguing that, by issuing its wage withholding order, the Department violated the bankruptcy court's confirmation order specifying that Dempsey's child support arrearage would be paid in full “inside the plan.” (Doc. 1-1, at 72.) Dempsey filed an amended motion for contempt on May 25, 2016. (Doc. 1-2, at 1-10.)

         On June 6, 2016, the bankruptcy court issued an order denying Dempsey's motion for contempt. In its order, the bankruptcy court ruled that, although the confirmation order “require[d] the Department to discontinue all collection activity outside the plan once the plan is confirmed, . . . the plan was not sufficiently clear and definite in this requirement to provide a basis for a finding of contempt.” (Doc. 1, at 4.) The bankruptcy court did, however, order the Department to: (1) terminate its income withholding order; (2) refund to Dempsey any amounts received and not yet disbursed; and (3) amend its proof of claim to reduce its amount by all sums received from Dempsey's employer after confirmation and not refunded. (Id.)

         On June 20, 2016, Dempsey filed a notice of appeal regarding the bankruptcy court's order denying his motion for contempt. (Doc. 1, at 1-2.) On July 1, 2016, the Department filed a notice of cross-appeal. (Id. at 5-6.) The cross-appeals are now ripe for the Court's review.

         III. ANALYSIS

         The central issue in this cross-appeal is whether the Department is permitted to pursue collection of Dempsey's child support arrearages outside the terms of his confirmed Chapter 13 plan. The Department argues that the bankruptcy court incorrectly found it was not permitted to seek such payments in contravention of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (2005) (the “BAPCPA”). Dempsey agrees with the bankruptcy court's determination that the Department is not permitted to seek such payments, but argues that the bankruptcy court erred when it did not hold the Department in contempt for seeking collection of Dempsey's child support arrearages after the bankruptcy court's confirmation of his Chapter 13 plan.

         The Court finds In re Gonzalez, 832 F.3d 1251 (11th Cir. 2016), a case with almost identical facts, instructive in resolving both parties' arguments on appeal. In Gonzalez, the Department issued a withholding order to a debtor's employer for payment of the debtor's domestic support obligation after the bankruptcy court confirmed the debtor's Chapter 13 plan. As in this case, the debtor's confirmed Chapter 13 plan provided for full payment of the domestic support obligation arrearages. Id. at 1252. After the Department attempted to intercept a payment from the employer pursuant to the withholding order, the bankruptcy court found the Department in contempt for violating its confirmation order. Id. The Department subsequently appealed the bankruptcy court's contempt order, arguing that changes Congress made to the Bankruptcy Code through the BAPCPA allowed it to seek collection of the debtor's domestic support obligation arrearages outside the terms of the debtor's confirmed Chapter 13 plan.[1] The United States Court of Appeals for the Eleventh Circuit ...


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