Enforcement of Child Support Arrears and Chapter 13 Bankruptcy

Support Magistrate determined that respondent willfully failed to pay $7,814.90 in child support arrears, and referred matter to Family Court for confirmation. Respondent’s commencement of Chapter 13 bankruptcy stays all actions and proceedings to collect pre-petition claims against debtor and his property. See, 11 USC § 362[a][1]. Although Family Court is precluded from exercising its enforcement powers pursuant to FCA § 454 to recover arrears while Chapter 13 bankruptcy plan is in effect, Family Court finds that it is not prohibited to confirm finding of willful violation already made by Support Magistrate and hold enforcement in abeyance pending completion of the Chapter 13 bankruptcy plan.
In the Matter of a Support Proceeding Marcia T., Petitioner,
v.
Raymond W., Respondent.
F-01769-08/08A
Family Court, Albany County
Decided on September 1, 2009
CITE TITLE AS: Matter of Marcia T. v Raymond W.
Marcia T., Matter of, v Raymond W., 2009 NY Slip Op 51883(U). Parent and Child-Support-Bankruptcy Proceedings Not Bar to Recovery of Arrears under Prior Determination of Support Magistrate. (Fam Ct, Albany County, Sept. 1, 2009, Maney, J.)
APPEARANCES OF COUNSEL
Bixby, Crable & Stiglmeier, PLLC (Carol Stiglmeier of counsel) for Marcia T.
Jeffrey S. Berkun, Esq. for Raymond W.
OPINION OF THE COURT
Gerard E. Maney, J.
By order dated January 14, 2009, the Support Magistrate determined that respondent Raymond W. willfully failed to obey an order of the Court pursuant to Family Court Act § 156 by failing to pay $7,814.90 in child support arrears. The matter was referred to this Judge for confirmation in accordance with Family Court Act § 439 (a).
Counsel for respondent maintains that because respondent filed for Chapter 13 Bankruptcy relief in November 2008, the confirmation hearing must be stayed. Counsel argues that the bankruptcy code contains an automatic stay provision that provides that the filing of a bankruptcy petition operates as a stay of actions or proceeding to recover a claim against the debtor that arose prior to the commencement of the case. Although certain exceptions to the automatic stay provisions exist, counsel argues that none apply in the instant family court proceeding.
The court agrees with counsel that the commencement of a case under Chapter 13 of the United States Bankruptcy Code stays all actions and proceedings to collect pre-petition claims *2 against the debtor and his property (11 USC §362 [a] [1]) or to obtain possession and control of property of the estate (11 USC §362 [a] [3]). The property of the estate, which is broadly defined, specifically includes “earnings” (11 USC §541 [a] [6]; §1306 [a];). Because payments to creditors must come from the debtor’s post-petition earnings, those earning are property of the Chapter 13 estate (11 USC §1306 [a] [2]). Thus, “[t]he claimant seeking to collect arrearages in support obligations is not free to pursue the Chapter 13 debtor’s post-petition earnings” (Margaret Howard, A Bankruptcy Primer for the Family Lawyer, Family Law Quarterly, Volume 31, Number 3, Fall 1997, at 380).
Although the court finds that it is precluded from exercising its enforcement powers pursuant to Family Court Act §454 to recover arrears while the Chapter 13 bankruptcy plan is in effect, it does not find that it is prohibited by the bankruptcy laws from confirming the finding of a willful violation already made by the Support Magistrate and holding its authority to enforce such finding in abeyance pending completion of the Chapter 13 bankruptcy plan.
It is this court’s understanding that petitioner has filed a claim in the bankruptcy proceeding for the support arrears and that such arrears will be payable under the bankruptcy plan. If the payment of arrears is not satisfied when the Chapter 13 bankruptcy plan is closed, petitioner may move to restore the matter to the family court calendar to have the court exercise its enforcement powers to compel the payment of arrears.
Accordingly, after examination and inquiry into the facts and circumstances of the case and after hearing the proofs and testimony offered in relation thereto and based on evidence that a lawful order of support was in effect and respondent had the ability to pay but willfully failed to do so, it is
ADJUDGED that Raymond W. failed to obey the order of this court for the support of his children , A. W. and S. W., and that such failure was willful;
ORDERED that the determination of the Support Magistrate pursuant to Family Court Act § 156 made herein that Raymond W. willfully failed to obey an order of the court is hereby confirmed; and it is further
ORDERED that if the payment of arrears as set forth in the Support Magistrate’s January 14, 2009 order is not satisfied when respondent’s Chapter 13 bankruptcy plan is closed, petitioner may move to restore the matter to the family court calendar to have the court exercise its enforcement powers pursuant to Family Court Act §454.

I have previously written about several different situations involving interaction between New York’s Family Law and bankruptcy.  The basics of divorce and bankruptcy were addressed in this post,  the issues related to the bankruptcy court’s handling of domestic support obligations were addressed in this post, and the issues related to attorneys fees and bankruptcy were addressed in this post.  Because of the complexity of the issues involved, New York courts continue to decide cases were the family law and bankruptcy law interact.  A recent case of Marcia T. v. Raymond W., 24 Misc.3d 1245(A) (Fam. Ct. Monroe Co. 2009), addressed whether Chapter 13 bankruptcy stay prevented recovery of child support arrears and a finding of willful failure to pay.

Respondent father filed for Chapter 13 Bankruptcy relief in November 2008.  Petitioner mother brought a willful violation petition based upon the father’s failure to pay several thousand dollars in child support arrears.  Support Magistrate determined that respondent willfully failed to pay $7,814.90 in child support arrears, and referred matter to Family Court for confirmation in accordance with Family Court Act § 439(a).  Respondent’s lawyer argued that because of Chapter 13 filing, the confirmation hearing must be stayed since automatic stay prevents recovery of any claims that arose prior to the commencement of the bankruptcy case.

The Family Court held that respondent’s commencement of Chapter 13 bankruptcy and resulting automatic stay stops all actions and proceedings to collect pre-petition claims against debtor and his property.   Because payments to creditors must come from the debtor’s post-petition earnings, those earning are property of the Chapter 13 estate, pursuant to 11 U.S.C. §1306 (a)(2).  Thus, the claimant seeking to collect arrearages in support obligations is not free to pursue the Chapter 13 debtor’s post-petition earnings.  It further held that although Family Court is precluded from exercising its enforcement powers pursuant to FCA §454 to recover arrears while Chapter 13 bankruptcy plan is in effect, Family Court found that it is not prohibited to confirm finding of willful violation already made by Support Magistrate and hold enforcement in abeyance pending completion of the Chapter 13 bankruptcy plan.

The court further noted that petitioner has filed a claim in the bankruptcy proceeding for the support arrears and that such arrears will be payable under the bankruptcy plan. If the payment of arrears is not satisfied when the Chapter 13 bankruptcy plan is closed, petitioner may move to restore the matter to the family court calendar to have the court exercise its enforcement powers to compel the payment of arrears.

The above is an excellent illustration of how a Chapter 13 bankruptcy can be utilized to prevent serious problems that a finding of willful violation may present.  Further, since the typical Chapter 13 plan lasts for 5 years, this allows the party paying child support to extend payment of child support arrears over 5 years.  A family law lawyer needs to be familiar with bankruptcy law issues since it is not uncommon for these areas of law to interplay.

Upcoming Changes to New York’s Child Support Statute

New York’s child support statute has been long criticized for its its $80,000.00 cap on the basic economic child support.  The critics have argued that since the statute was enacted approximately 20 years ago, the basic economic child support cap figure was too low.  New York Legislature apparently heard those concerns.  Laws of 2009, Chapter 343  enacted the “child support modernization act” which amended  the provisions of the Child Support Standards Act to raise the cap on combined parental income to $130,000.00, effective January 31, 2010, and to provide for the adjustment of the $130,000.00 cap every two years to reflect changes in the Consumer Price Index.  The child support percentages of payments that non-custodial parents are obligated to make toward child support were not modified by the amendments.  Domestic Relations Law §240 (1-b) (2) and Family Court Act §413 (1) (c) (2) were each amended to provide that the court shall multiply the combined parental income up to the amount set forth in Social Services Law §111-i, (2) (b).  Social Services Law §111-i (2)(b) provides that the combined parental income amount to be reported in the child support standards chart and utilized in calculating orders of child support in accordance with Domestic Relations Law §240 (1-b) (2) and Family Court Act §413 (1) (c) (2) shall be one hundred thirty thousand dollars; and that beginning January 31, 2012 and every two years thereafter, the combined parental income amount shall increase by the product of the average annual percentage changes in the consumer price index for all urban consumers (CPI-U) as published by the United States Department of Labor, Bureau of Labor Statistics, for the two year period rounded to the nearest one thousand dollars.  These amendments take effect on January 31, 2010.

While I view the changes as necessary to keep up with economic changes, once the two year recalculation provision takes effect, it is going to make more difficult for family law lawyers to calculate the appropriate child support figures.

Paying For Summer Camp and Child Support

As the end of the school year approaches, parents usually begin to look at various activities their children may participate in during the summer.  One such popular option is a summer camp, which may be a day camp or a sleep-away camp.  I am often asked who is obligated to pay for it.

I have previously written that under New York’s Child Support Standards Act, the parent paying child support is typically obligated to pay a portion of child care and other expenses.  In Micciche v. Micciche, 2009 NY Slip Op 03702 (2nd Dept. 2009), the Appellate Division affirmed the principle that the cost of the summer camp is considered to be a part of the  child care expense, and as such, both parties are required to contribute their pro-rata share in accordance with their income.

If there are no contrary provisions in the parties’ separation agreement or judgment of divorce, and one of the parents refuses to contribute his or her share of summer camp, I recommend that the other party discuss this issue with an experienced family law lawyer.  Sometimes, it only takes a letter from an attorney to resolve such disputes.

New York Child Support Add-Ons and Basics of Child Support

Under New York law, child support consists of two elements: “basic” child support and the “add-ons.”  Pursuant to Domestic Relations Law §240, New York requires that basic child support be calculated in two parts: (a) the support based on the total combined income of both parents up to $80,000; and (b) the support based on the total combined income of both parents over $80,000.  For both parents’ combined adjusted gross income over $80,000, the court has the discretion to apply the same statutory guidelines, and for all practical purposes will do so. See Cassano v. Cassano, 85 N.Y.2d 649 (1995).  The result will be the total combined basic child support attributable to both parents for the combined income in excess of $80,000.  From the combined basic child support as calculated under the statute, a pro-rata share of each parent’s income is calculated.  Each parent’s pro-rata share is a ratio equal to that parent’s adjusted gross income divided by the combined adjusted gross income for both parents.  That pro-rata share is used to calculate each parent’s share of child support add-ons.

The parent paying child support is also obligated to pay for his/her pro-rata share of the following add-ons.

Day Care

Domestic Relations Law §240 (1-b)(c)(4) and Domestic Relations Law §240 (1-b)(c)(6) provide that when a custodial parent is working, seeking work, or is in school or training which will lead to employment, reasonable day care expenses will be allocated in a ratio equal to the each parent’s income to the combined income.  Reasonable day care expenses vary and each situation should be discussed with an experienced family law lawyer to determine each party’s rights and responsibilities.

Health Care Expenses

Domestic Relations Law §240 (1)(d) provides that the cost of health care insurance shall be allocated in the same proportion as each parent’s income is to the combined parental income.  Domestic Relations Law §240 (1-b)(c)(5) provides that reasonable health care expenses not covered by insurance are allocated in the same proportion as each parent’s income is to the combined parental income.  Obviously, the parties can opt-out of the CSSA’s provisions with respect to the add-ons. Any provisions with respect to the cost of health insurance are enforceable just like child support provisions.

In Rochester and Monroe County, as well as in surrounding counties, the Supreme Court and Family Court usually require the non-custodial parent to carry health care insurance for the children.  However, similarly to child care, there may be situations where it is more beneficial financially for the custodial parent to pay for the cost of health insurance for the children and for the non-custodial parent to contribute his or her share.  The parties should be mindful of the cost of health care coverage and should discuss these issues with a family law attorney before entering into a separation agreement or agreeing to a judgment of divorce.

Educational and Extracurricular Expenses

In addition, the parents may be obligated to pay for the cost of extracurricular expenses and educational expenses, such as a private school or college.  I have previously discussed issues related to the college costs, and will address issues related to paying for a private school at a later date.

Parental Interference With Visitation and Suspension of Child Support

I have previously written that a child support obligation can be suspended or terminated in situations where the court makes a finding that the child has deliberately severed his/her relationship with a parent, thereby abandoning that parent. However, in order for a court to make a finding of abandonment, the child must be of employable age.

Even if the child is not of employable age, the non-custodial parent’s child support obligation can be suspended or terminated, if the breakdown in the parent-child relationship came as a result of the actions of the custodial parent.

In Ledgin v. Ledgin, 36 A.D.3d 669 (2nd Dept. 2007), the Appellate Division held that interference with visitation rights can be the basis for the cancellation of arrears of maintenance and the prospective suspension of both maintenance and child support. However, such relief is warranted only where the custodial parent’s actions rise to the level of “deliberate frustration” or “active interference” with the noncustodial parent’s visitation rights.

In Frances W. v Steven M., 15 Misc.3d 839 (Fam. Ct. Queens Co. 2007), the court held that petitioner was not entitled to child support where she intentionally aided her sister in brainwashing the child, who is almost 20 years old, into falsely believing that the father had sexually abused her when she was an infant, and otherwise poisoned the child’s relationship with respondent from the time she was four years old. The court stated that since petitioner was an active participant in destroying her niece’s relationship with the father, “she was precluded from obtaining child support from respondent as a matter of fundamental fairness.”

In S.M.B. v D.R.B, 17 Misc.3d 1132(A) (Fam. Ct. Onondaga Co. 2007), petitioner father sought vacatur of order of support contained in parties’ divorce judgment, which incorporated their opt-out agreement. Father began his action after the mother engaged in pattern of active interference and deliberate frustration of child’s relationship with father. Mother was very angry that father paid no more child support than what’s been ordered by court. Mother has withheld father’s access to child since she moved to Florida and remarried. The court found that mother’s acts of alienation were not isolated incidents but a continuing pattern. The court further found that the child now shows no interest in having relationship with father because of mother’s unfortunate endeavors. Father’s support obligation vacated since father met his burden of establishing that mother unjustifiably frustrated his right to reasonable access.

If the child is not of employable age, and the custodial parent did not interfere with the relationship between the non-custodial parent and the child, the non-custodial parent’s obligation to pay child support will not be terminated by the court. Foster v. Daigle, 25 A.D.3d 1002 (3rd Dept. 2006).

Since most of these cases are tried on the issue of parental interference, it is important that each such case, before it is brought, is carefully screened by an experienced family law lawyer. Because parental interference cases require a significant level of proof, it is important that a petitioner is represented by an attorney familiar with such cases.

Unmarried Fathers, Child Support and Liability for Birth Expenses of the Child and the Mother

In a typical child support proceeding brought under the Article 4 of the Family Court Act, the child support is retroactive to the date of the filing of the child support petition.  The Family Court is generally unable to grant child support to a date preceding the filing, unless the child is receiving public assistance.   However, where the paternity is concerned, Family Court’s powers are much broader.  Paternity proceedings are governed by the Article 5 of the Family Court Act.  Article 5 contains two sections that address child support, including costs of birth and related expenses: Section 514 and Section 545.

Under Section 514 of the Family Court Act, the father is liable to pay the reasonable expenses of the mother’s confinement and recovery and such reasonable expenses in connection with her pregnancy, as the court in its discretion may deem proper.  What makes this significantly different from child support proceeding under Article 4 of the Family Court Act, usually Sections 412 and 413, is that the mother’s expenses typically occur well before the petition is filed and even before the child is born.  While Section 514 gives the Family Court at least some discretion in apportioning such expenses, if the mother was receiving public assistance during her pregnancy, the father may be liable to the social services district furnishing such medical assistance and to the state department of social services for the full amount of medical assistance so expended.  See Wayne County Dept. of Social Services ex rel. Van Dusen v. Petty, 273 A.D.2d 943 (4th Dept. 2000).

Under Section 545(1) of the Family Court Act, the father is responsible for child support, retroactive to the earlier of the date of the application for an order of filiation, or, if the children for whom support is sought are in receipt of public assistance, the date for which their eligibility for public assistance was effective.  However, under Section 545(2) of the Family Court Act, the Family Court’s discretionary powers are much broader.  Section 545(2) provides that the court, in its discretion, taking into consideration the means of the father and his ability to pay and the needs of the child, may direct the payment of a reasonable sum or periodic sums to the mother as reimbursement for the needs of the child accruing from the date of the birth of the child to the date of the application for an order of filiation.  In my experience, in dealing with a petition brought under Section 545, the Family Court unambiguously focuses on the unwed father’s present ability to pay, as measured by his current resources and his earning capacity, and not what the unwed father’s ability to pay was at the time of birth.  This may come as an unwelcome surprise to the unwed father, if the petition is brought several years after the child is born.

Yet another difference between proceedings brought under Article 5 of the Family Court Act and Article 4 of the Family Court Act is that under Section 517 of the Family Court Act, proceedings to establish the paternity of a child, and to establish liability for mother’s expenses, may be instituted during the pregnancy of the mother or after the birth of the child.

As a lawyer frequently dealing with these issues, I  evaluate my clients’ financial situation at the time of the child’s birth and the time the petition is brought, since the court will focus on my client’s ability to pay.  I also analyze the mother’s finances within the same time frame and also the proof of payment of medical bills.  Ocasionally, these cases are won and lost on the issue of admissibility of the medical bills.

Downward Modification of Child Support

I have mentioned last week that I have been seeing a significant increase in Family Court and Supreme Court filings seeking downward modification of child support. Most of these filings were brought on by a non-custodial parent after a loss of employment. In today’s economy, a loss of employment is not uncommon, so the courts are dealing with a significant rise in downward modification petitions.

There are two different situations that may arise when a non-custodial parent seeks downward modification of child support. First, if the child support was established by a stipulation or an agreement, that parent must establish that the loss of employment represents an unreasonable and unanticipated change in circumstances since the time of the stipulation to justify a modification, and that the alleged changes in that party’s financial position was not of his/her own making. See Connolly v. Connolly, 39 AD3d 643 (2nd Dept. 2007); Terjesen v. Terjesen, 29 A.D.3d 705 (2nd Dept. 2007). Additionally the party who lost employment will also have to establish that he/she used his/her best efforts to obtain employment commensurate with his/her qualifications and experience. Cox v. Cox, 20 A.D.3d 527 (2nd Dept. 2005). Further, allegations of a reduction in actual income are insufficient to support an application for a downward modification, as a matter of law, where contractual support obligations are based on a payor’s ability to earn rather than on his or her actual income at the time of the execution of such stipulation or agreement. Ellenbogen v. Ellenbogen, 6 A.D.3d 1026 (3rd Dept. 2004).

If the child support order was set by the court after a hearing, the parent seeking the modification of a child support obligation has the burden of establishing that there has been a substantial and unforeseen change in circumstances warranting a change in the support obligation. See Ketchum v. Crawford, 1 A.D.3d 359 (2nd Dept. 2003); Cadwell v. Cadwell, 294 AD2d 434 (2nd Dept. 2002). This standard is much easier to meet than the one applicable to the situations where child support was set by a stipulation or an agreement.

Depending on the circumstances, a downward modification case will fall in one of the two situations discussed above. Before commencing any proceeding, discuss your situation with an experienced New York family law lawyer to make sure that the proceedings are properly commenced and that you can meet the applicable legal standard.

Recession and Increase in Downward Modifications Petitions

I read New York Times article today that closely parallels my experience over the past few months. As the economy continues to deteriorate and jobs are lost through no fault of the party paying child support, the Family Court has seen a significant increase in petitions seeling downward modification of child support. While the article discusses how the cases are handled in New York City, as opposed to Rochester and nearby counties where I practice, I see a lot of similar issues in our local Family Courts.

I have previously discussed issues related to the contents of a Family Court petition seeking a modification of child support obligation. I should note that downward modification of child support due to a loss of employment is never guaranteed, and anyone seeking downward modification should use assistance of an experienced child support lawyer. I am planning to write a more detailed post on downward modification of child support in the near future.

Child Support Calculation and Income Tax Refunds

In general, the Child Support Standards Act includes all of the parties’ income for child support calculations, subject to appropriate child support limits and deductions. What happens in the situation when a party is receiving a tax refund for teh taxes paid during the previous year? In Shelby T. v. Michael L., 2009 NY Slip Op 29075 (Fam. Ct. Clinton Co. 2009), Judge Lawliss overturned the support magistrate’s decision which included the tax refund as income in the child support calculation. The court held that since the party obligated to pay child support receives a tax refund on the taxes paid in 2008, in 2009, if the court were to include the tax refund in the child support calculation, then the money earned, and taxed, in 2008, would count as income for child support purposes once again in 2009. Clearly, that was not the result contemplated by the Child Support Standards Act.

If engaged in child support litigation, a lawyer must make sure that his client’s income is counted only once and that the client receives all applicable deductions and variances.

Overpayment of Child Support and Right of Recoupment

Periodically, I am asked about situations where an overpayment of child support has taken place. Most of the time in those situations, I, as a lawyer, have to deliver to the client the unpleasant news that the amount overpaid cannot be recovered. This is true whether the child support was being paid pusuant to a judgment of divorce, separation agreement, or an order of Family Court. With respect to child support, there is a strong public policy against restitution or recoupment of any overpayment. See Katz v. Katz, 55 A.D.3d 680 (2nd Dept. 2008). The strong public policy considerations as decided by the New York courts, prevent recoupment or refund of child support paid. However, a parent may be entitled to a credit, enabling him or her to re-coup the overpayment of the child support payments against his/her share of the statutory add-on expenses – the portion of child support intended to cover child care and a child’s educational and special needs. See Coull v. Rottman, 35 AD3d 198 (1st Dept. 2007).

There are also certain limited circumstances in which a refund of child support may take place. For example, a refund may be directed when there was a mathematical error in the calculation of the amount of support (Colicci v. Ruhm, 20 AD3d 891 (4th Dept. 2005); when the support amount in the final order of support is less than in the temporary award (Maksimyadis v. Maksimyadis, 275 AD2d 459 (1st Dept. 2000)); or when it is shown that the subject child is not the biological child of the payor and there is no finding of estoppel (Thomas v. Commissioner of Social Services, 287 AD2d 642 (2nd Dept. 2001). There may be another category of cases where a refund of child support may be ordered. In Spencer v. Spencer, previously discussed on this blog, the Court of Appeals hinted that the recoupment may be available where it is ultimately determined that New York court lacked jurisdiction to order payment of child support.

If you are in a situation where you believe that child support was or is being overpaid, speak with an experienced family law attorney and find out what your options are and what can done in your particular case.