Behrens v. US (In re Behrens)

No. 13-6052 (8th Cir. B.A.P. February 12, 2014).
Affirming the bankruptcy court’s ruling, the Eighth Circuit Bankruptcy Appellate Panel held that a bankruptcy case or adversary proceeding may not be used as a means to collaterally attack a prepetition final criminal judgment.
Procedural context:
Appeal by the debtor of an order dismissing an adversary proceeding as a collateral attack on a prepetition criminal judgment.
Behrens was the subject of a civil complaint by the Securities and Exchange Commission, which resulted in a consent judgment for the appointment of areceiver for Behrens and, in March 2009, a stay of all other pending litigation against Behrens. Shortly thereafter, Behrens was indicted on federal criminal charges, and ultimately sentenced to serve five years in prison and to make restitution to the beneficiaries of the pending civil receivership. Two years later, Behrens filed a chapter 11 voluntary petition, which was later dismissed and reinstated and converted to chapter 7. Behrens then filed an adversary proceeding against the United States seeking to void the government’s restitution lien and obtain the return of all funds and property thus far collected from him, arguing that the criminal prosecution and continuing collection efforts violated the March 2009 stay order and the automatic stay imposed by 11 U.S.C. § 362. Granting the United States’ motion to dismiss, the bankruptcy court concluded it was an impermissible attempt “to collaterally attack the validity of a prepetition judgment entered by the United States District Court.” The Bankruptcy Appellate Panel affirmed, observing that the government’s lien arose from an order of restitution, which is specifically protected from discharge by 11 U.S.C. § 523(a)(13).
Schermer, Nail, and Shodeen.

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