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Wohleber v. Skurko & Gentile (In re Wohleber)

A creditor must attempt to stop a state court from violating the stay, the Sixth Circuit BAP holds.

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Case Type:
Case Status:
Reversed and Remanded
18-8008 (6th Circuit, Mar 04,2019) Published
The Sixth Circuit Bankruptcy Appellate Panel reversed the Bankruptcy Court for the Northern District of Ohio, ruling (i) the continuation of a contempt proceeding against a Chapter 13 debtor for failure to pay a divorce property settlement constitutes a violation of the automatic stay and (ii) the creditor violates the automatic stay by failing to take any affirmative steps to stay the contempt proceedings.
Procedural context:
Nearly three years after debtor was jailed for contempt failing to pay a property settlement to his ex-wife, debtor commenced an adversary proceeding against his ex-wife, her attorney, and the state court judge for violation of the automatic stay. The state court judge was dismissed based on judicial immunity. The bankruptcy court granted a motion for judgment after conclusion of debtor's evidence at trial, finding that neither the creditor (ex-wife) nor her attorney made an attempt to collect the property settlement after the debtor's bankruptcy filing and that neither had an affirmative duty to take any action to stay the contempt sentencing hearing. The debtor appealed to the Sixth Circuit Bankruptcy Appellate Panel, and the B.A.P. reversed finding that the conduct of the sentencing hearing did violate the automatic stay and that "[T]he burden was on the creditor and her legal counsel to stop the collection proceeding once the bankruptcy was filed." The B.A.P. remanded to the bankruptcy court for a determination of whether the creditor or her counsel took any action to attempt to stay the sentencing hearing and, if not, to determine appropriate damages for violation of the automatic stay.
As part of state court divorce proceedings, the state court entered a property settlement in favor of the wife (creditor) and, subsequently, ordered the husband (debtor) to pay the property settlement within 21 days. The debtor did not comply with order and the court ultimately found the debtor in contempt. After the court found the debtor in contempt but before the court pronounced a sentence for contempt, the debtor filed a Chapter 13 bankruptcy petition. The debtor's bankruptcy counsel filed a suggestion of bankruptcy before the sentencing hearing. Debtor's state court counsel attended the sentencing hearing and notified the court and the creditor's counsel of the bankruptcy filing both in chambers before the hearing and on the record during the hearing. The state court responded that court had researched the issue and believed that the automatic stay did not prevent her from sentencing the debtor for contempt. The state court asked debtor's counsel if he could provide any contrary case law, and the debtor's counsel could not. The court then sentenced the debtor to 30 days in jail, but with a condition that he would be released upon payment of the property settlement. The debtor spent the next 10 days in jail and was released, after the filing of an emergency motion to vacate, by agreement of the parties.

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