Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
By Diane Davis
Sept. 16 — An award of attorney's fees to a debtor's ex-wife for “overtrial” is a domestic support obligation (DSO) entitled to priority in bankruptcy, the Seventh Circuit held Sept. 14 ( Trentadue v. Gay (In re Trentadue), 2016 BL 299410, 7th Cir., No. 15-3142, 9/14/16 ).
Judge Michael S. Kanne of the U.S. Court of Appeals for the Seventh Circuit concluded that the $25,000 attorney's fee award was in the nature of support and was awarded by the state court to compensate the debtor's ex-wife for additional legal fees she incurred as a result of the debtor's “desire to ‘win' and control” the proceedings, which involved issues of custody, placement, health insurance, and child support for the couple's six children.
To qualify as a DSO under Bankruptcy Code Section 101(14A)(B), the debt must be “in the nature of … support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child's parent, without regard to whether such debt is expressly so designated.” DSOs are exempt from discharge in bankruptcy and entitled to priority status, the court said, citing Sections 1328(c)(2), and 507(a)(1)(A).
Debtor Christopher Trentadue and his ex-wife have joint legal custody of their six children. They ended up in protracted litigation in state court, which eventually ordered the debtor to pay his ex-wife $25,000 in attorney's fees for “overtrial,” but directed him to make the payment directly to his ex-wife's attorney Julie Gay.
The debtor never paid Gay, but filed for Chapter 13 protection, which allows individuals receiving regular income to obtain debt relief while retaining their property. To do so, however, the debtor must propose a plan that uses future income to repay all or a portion of his debts over a three to five year period.
Gay claimed a nondischargeable, DSO entitled to priority status in the debtor's bankruptcy case.
The bankruptcy court overruled the debtor's objection, and the district court affirmed.
On appeal, the debtor argued that the award can't be a DSO because it isn't payable to his spouse, former spouse, child, or a caregiver, but to his ex-wife's attorney, and that the award was intended to be a punishment and not in the nature of support.
The Seventh Circuit rejected the debtor's first argument on the wrong payee because he didn't raise it in the court below.
The court looked to the state court's intent when awarding the attorney's fees and concluded that they were in the nature of support, not meant as a punishment.
Senior Judge Kenneth F. Ripple, and Judge Ann Claire Williams joined the opinion.
Christopher Keleher, Keleher Appellate Law Group, Chicago, represented debtor/appellant Christopher A. Trentadue; Michael P. Dunn, Gregory M. Schrieber, Kerkman - Dunn, Milwaukee, Wisc., represented appellee Julie M. Gay; Mary B. Grossman, Trustee, pro se, Milwaukee, Wisc.
To contact the reporter on this story: Diane Davis in Washington at email@example.com
To contact the editor responsible for this story: Jay Horowitz at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)