In re Johnson

655 B.R. 83

IN RE: Jeremy Jermaine JOHNSON, Debtor(s).

C/A No. 23-02461-EG

United States Bankruptcy Court, D. South Carolina

Signed October 27, 2023

Eddye L. Lane, Columbia, SC, for Debtor.

Pamela Simmons-Beasley, Columbia, SC, Trustee, Pro Se.

AMENDED ORDER ON MOTION FOR RELIEF FROM STAY

Elisabetta G. M. Gasparini, United States Bankruptcy Judge

THIS MATTER is before the Court on the Motion for Relief from Stay ("Motion") filed by Jessica Perez Johnson ("Movant").¹ Jeremy Jermaine Johnson ("Debtor") filed a timely objection to the Motion, and a hearing was held on October 3, 2023. The hearing was attended by counsel for both parties and the Debtor. After a thorough review of the pleadings, evidence, and arguments presented, the Court makes the following findings of fact and conclusions of law:

FINDINGS OF FACT

Debtor and Movant are husband and wife. On July 18, 2023, Movant filed an action in the Family Court for Lexington County, South Carolina (the "Family Court"), Case No. 2023-DR-32-01405 ("Family Court Case"), seeking divorce, separate maintenance and support, child custody, use of the marital residence, equitable distribution, alimony, and attorney's fees. That same day, Movant also filed a Motion for Temporary Relief requesting separate maintenance and support, possession of marital property, custody of minor children, child support, medical expenses, health insurance, alimony, use of the vehicle, payment of debt, and payment of attorney's fees. The Family Court set a hearing on the Motion for Temporary Relief for September 7, 2023.

On August 17, 2023 ("Petition Date"), Debtor filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code.² Debtor previously received a discharge under 11 U.S.C. § 727 on December 5, 2019 in a prior Chapter 7 case filed within the four years preceding the Petition Date; accordingly, he is ineligible to receive a discharge in this case.³ Debtor's Schedule E/F lists Movant as holding a general unsecured claim in an unknown amount.⁴ Debtor's Schedule I indicates that Debtor receives $1,604.00 from Social Security and $11,317.40 from "Social Security Dependent Benefit," "VA Disability," and "VA Disability (spouse care)." Debtor has filed a Chapter 13 Plan, which does not propose payment of any claims held by Movant, nor does it provide for treatment of any domestic support obligations.⁵ The hearing on confirmation of Debtor's proposed Chapter 13 Plan is scheduled for October 31, 2023.

On September 11, 2023, Movant filed the Motion seeking relief from stay pursuant to 11 U.S.C. § 362(b)(2) and (d)(1) to pursue her Motion for Temporary Relief in Family Court. On September 25, 2023, Debtor filed an Objection to the Motion, raising various defenses to the Family Court Case itself, including lack of proper service, lack of grounds for divorce, and lack of standing. Debtor argues that Movant is unlikely to prevail in the Family Court Case, and that lifting the stay at this time will only cause Debtor unnecessary financial hardship. The parties filed a Joint Statement of Dispute on September 28, 2023.⁶

DISCUSSION AND CONCLUSIONS

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(G), and the Court may enter a final order.

I. The Automatic Stay - 11 U.S.C. § 362

Section 362(a) of the Bankruptcy Code provides that the filing of a bankruptcy petition "operates as a stay, applicable to all entities, of, [among other things,] the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title" and "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate[.]" 11 U.S.C. § 362(a)(1), (3). While the scope of the automatic stay is broad, there are some statutory exceptions to its application. For example, § 362(b) provides that the filing of a bankruptcy petition does not operate as a stay of (1) the commencement or continuation of a civil action or proceeding against a debtor for the establishment or modification of an order for domestic support obligations, concerning child custody or visitation, or for the dissolution of a marriage (except to the extent that such proceeding seeks to determine the division of property that is property of the estate); (2) the collection of a domestic support obligation from property that is not property of the estate; or (3) with respect to the withholding of income that is property of the estate or property of the debtor for payment of a domestic support obligation under a judicial or administrative order or a statute. 11 U.S.C. § 362(b)(2)(A)-(C).⁷

Section 362(d) further allows the Court to grant relief from the automatic stay for cause. "The party requesting relief has the initial burden of proving cause exists for relief from the automatic stay[.]" In re Morgan, 630 B.R. 476, 479 (Bankr. D.S.C. 2021) (citing 11 U.S.C. § 362(g); In re Toomer, C/A No. 10-07273-JW, 2011 WL 8899488, at *2 (Bankr. D.S.C. Oct. 5, 2011)). "Once the creditor makes a prima facie case, the burden shifts to the debtor on all other issues." Id. (quoting In re Garcia, 584 B.R. 483, 488-89 (Bankr. S.D.N.Y. 2018)).

II. Arguments of the Parties

Movant argues that (1) the automatic stay is not applicable to the Family Court Case because it is an action seeking dissolution of a marriage, establishment of a domestic support obligation, and determination of child custody or visitation; and (2) Debtor's sole source of income consists of Social Security Income and VA Disability Benefits, which Movant asserts are not property of the estate, and therefore, collection of any domestic support obligation ordered by the Family Court would not be satisfied out of property of the estate.

Debtor recognizes that § 362(b)(2)(A) allows the establishment of domestic support obligations in a family court during a bankruptcy case but argues that § 362(b)(2)(A) and § 362(d) do not allow a movant to proceed with a meritless family court action. Debtor testified at the hearing regarding Movant's lack of grounds to seek divorce and establishment of a domestic support obligation. Specifically, Debtor testified that he and Movant currently live together as husband and wife in the same residence. According to Debtor's testimony, the parties have had disagreements regarding finances, specifically regarding Movant's mismanagement of funds while acting as Debtor's Veterans Affairs-assigned fiduciary and custodian of his disability benefits, which resulted in Movant ultimately being removed as his fiduciary by Veterans Affairs. Despite the disagreements, Debtor indicated in his Objection and in the Joint Statement of Dispute that the parties have reconciled intimately since the filing of the Family Court Case. He testified that he needs his income to support his reorganization in this Chapter 13 case and cannot afford to hire additional counsel to represent him in the Family Court Case. Debtor also takes issue with the fact that he was not properly served in the Family Court Case and, therefore, there is no "action" to continue in Family Court as would be allowed under § 362(b)(2). Accordingly, as argued during the hearing, Debtor seeks a determination, among other things, that § 362(b)(2) does not apply. Even if he had been properly served, Debtor argues the Family Court would have no subject matter jurisdiction of the Family Court Case because the parties are still cohabitating and, under South Carolina family law, irreconcilable difference is not a sufficient ground for divorce. To the extent that the Court was inclined to allow the Family Law Action to proceed, Debtor requests that such proceeding not be allowed to proceed until after confirmation of a chapter 13 plan.

III. Relief Under 11 U.S.C. § 362(b)(2)

As a preliminary matter, the Court confirms that Movant may proceed in the Family Court Case with the following matters because they are expressly excepted from the automatic stay by 11 U.S.C. § 362(b): (1) continuation⁸ of the action to establish an order for a domestic support obligation, which may include separate maintenance and support, child support, alimony, and other maintenance and support;⁹ (2) continuation of the action concerning child custody or visitation;¹⁰ and (3) continuation of the action for the dissolution of the marriage between the parties.¹¹ Both parties may litigate the matters set forth above in the Family Court. However, additional relief from stay is necessary for the enforcement of a marital obligation against property of the bankruptcy estate or to hold Debtor in civil contempt. In re Parast, 612 B.R. 710, 721 (Bankr. D.S.C. 2020).

As to Debtor's argument that there was no "action" falling within the ambit of 11 U.S.C. § 362(b) because Debtor was not properly served, no evidence regarding service was presented by Debtor and, more importantly, the issue of proper service of a Complaint filed in the Family Court is a matter for the Family Court to decide—as well as the issue of subject matter jurisdiction.¹² Moreover, the Court notes that both "the commencement and continuation" of a family court action is carved out from the § 362 automatic stay under § 362(b)(2)(A); therefore, even if he had not been properly served, Debtor's bankruptcy does not stay any further attempts to properly serve Debtor or properly commence an action in Family Court to seek a divorce. Lastly, there is no reason to wait to "lift" the stay—to the extent it applies—until after confirmation. The Bankruptcy Code expressly provides that the stay is not applicable to some of the matters before the Family Court and the Court lacks statutory...