Bankr. M.D.N.C.: In re Calloway- Domestic Support Obligations and Good Faith in Chapter 13

Summary:

Ms. Calloway divorced Mr. Bowles and shortly before a final judgment was entered in their equitable distribution proceeding, she filed Chapter 13. Just prior to Ms. Calloway’s bankruptcy filing, the state court judge circulated a preliminary ruling to the parties via email, stating that he believed an unequal distribution of the marital assets in favor of Mr. Bowles would be equitable and that Ms. Calloway would be required was to pay a total of $50,514 by means of monthly payments of $300, due to the her liquidation of two retirement accounts, which had a total value of roughly $31,000. Additionally, since their separation, Ms. Calloway alone made all payments on the former marital home, with the mortgage against which being reduced by approximately $23,000.

Ms. Calloway’s Chapter 13 plan was proposed for 36 month with priority claims to be paid in full and an estimated 0% dividend to general unsecured creditors, with Mr. Bowles as the only listed such creditor. He, unsurprisingly, objected to confirmation of her plan asserting that the $50,514.52 owed to him was a priority claim as a domestic support obligation pursuant to §507(a)(1)(A) and that Ms. Calloway’s plan must provide for its full payment over the life of the plan pursuant to §1322(a)(2). The court found that Ms. Calloway’s plan appropriately provided for payment in full of priority claims, which, unless and until an objection determined otherwise, included Mr. Bowles claim as filed.

Mr. Bowles additionally objected on good faith grounds to confirmation, asserting that Ms. Calloway filed the case in bad faith to avoid repayment of his debt. The bankruptcy court rejected this characterization both because Ms. Calloway had steadfastly paid the mortgage against the jointly owned real property, without seeking to overstate her interest, and had no other means to repay the $50,514.52 on her fixed income other than over the course of a Chapter 13 plan.

Commentary:

While $1,111/mo. payment would satisfy Mr. Bowles’ priority claim in full in 60 months,  this does look an awful lot like a property settlement and not a domestic support obligation, so there may be an objection to claim pending questioning its priority status.  If successful,  the $1,111 a month plan would, in the 36 month Applicable Commitment Period required  here, only pay  a dividend of approximately 50% to Mr.  Bowles (or even less if there was an substantial and unanticipated  change in circumstance sufficient to justify a modification later.)

For a copy of the opinion, please see:

Calloway- Domestic Support Obligations and Good Faith in Chapter 13

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993.

2. Juris Doctor degree from George Washington University, 1996.

Admissions to Practice of Law:

North Carolina Bar, 1996.
Federal District Courts for the Eastern and Middle Districts of North Carolina.

Specialty Certification:

North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy.

Areas of Practice:

Practice limited to consumer and business debtor bankruptcy law, 1998 to present.

Memberships:

National Association of Consumer Bankruptcy Attorneys (NACBA).
North Carolina Academy of Trial Lawyers (NCATL).
North Carolina Bar Association, Bankruptcy Section.

Lectures prepared and presented:

North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court – C.Y.A. Forms to Help ‘Gird They Loins’; 2001.
Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002.
NACBA National Convention; Topic: Efficient Office Practices; 2003.
NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004.
Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004.

Positions held:

NACBA National Convention; Convention Chair; 2008.
NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008.
NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007.
NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007.
NACBA, Member of National Board of Directors, 2006 to present.
NCATL, Chair of the Bankruptcy Section, 2003 to 2007.
NACBA, Chair of the North Carolina Section, 2003 to 2007.
NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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