The Interplay Between Bankruptcy and Divorce Law in Virginia

Can an ex-wife enforce an affidavit of support against her debtor ex-husband in bankruptcy court after the state divorce court has already terminated spousal support?

No, the United States Bankruptcy Appellate Panel, of the First Circuit ruled in the case of  In re Schwartz, Bankrupty No. 06-13696 WCH (August 26, 2008) http://scholar.google.com/scholar_case?case=17506642435084451730&q=in+re+schwartz+Bankruptcy+No.+06-13696+WCH.&hl=en&as_sdt=80000000000002on , an appeal from the United States Bankruptcy Court for the District of Massachusetts. The Appellant ex-wife, who was a citizen of Israel, and the Appellee ex-husband had been married in 1996. In order to obtain permanent resident status for his foreign-born wife, the husband filed the required Form I-864 Affidavit of Support (“Affidavit of Support”), http://www.uscis.gov/files/form/i-864.pdf  , with what was then the Immigration and Naturalization Service (now the United States Citizenship and Immigration Service under the Department of Homeland Security) as his wife’s sponsor, promising to support his wife at a level above 125% of the federal poverty guidelines, and to reimburse the government should she ever fall below that level and become a public charge, subject to termination upon certain conditions, not including divorce. On January 6, 2003, the wife filed for divorce from the husband in Oklahoma state divorce court. On December 18, 2003, the Oklahoma State Court issued a Decree of Divorce allocating the assets and liabilities of the parties and terminating the husband’s obligation to support the wife as of June 1, 2004.

In Schwartz, the wife made a motion for reconsideration of prior order dismissing her adversary proceeding to enforce the Chapter 7 debtor ex-husband’s support affidavit and for a determination that his obligations thereunder were nondischargeable.   The bankruptcy court judge had dismissed the adversary proceeding for lack of subject matter jurisdiction.  On appeal, the United States Bankruptcy Appellate Panel ruled that the Bankruptcy court did not err by dismissing the proceeding, where ex-wife’s (Appellant’s) cause of action was barred by Rooker-Feldman doctrine or by res judicata effect of state divorce court’s prior judgment. Furthermore, ex-wife presented no newly discovered evidence, but simply sought to rehash prior arguments. 11 U.S.C.A. § 523(a)(5); http://codes.lp.findlaw.com/uscode/11/5/II/523 ,   Fed.Rules Civ.Proc.Rule 59(e), http://www.law.cornell.edu/rules/frcp/Rule59.htm ,  28 U.S.C.A 1334, http://www.law.cornell.edu/uscode/28/usc_sec_28_00001334—-000-.html .

If the Affidavit of Support had been considered by the state divorce court judge in rendering its decision to terminate support, then the wife’s claim in bankruptcy court was barred by the Rooker-Feldman  doctrine, which prohibits lower federal courts, including the United States Bankruptcy Courts, from reviewing final state court judgments.  On the other hand, if the Affidavit of Support had not been submitted in the divorce proceedings, the wife’s claim was nevertheless barred under the doctrine of res judicata , which “prohibits all parties and their privies from relitigating issues which were raised or could have been raised in a previous action, once a court has entered a final judgment on the merits in the previous action.” The First Circuit Bankruptcy Appellate Court affirmed the bankruptcy court’s dismissal on reliance on the Rooker-Feldman doctrine (Rooker v. Fidelity Trust Co. (1923) 263 U.S. 413 (Van Devanter) http://scholar.google.com/scholar_case?case=4127205289145291134&q=Rooker+v.+Fidelity+Trust+Co.+(1923)+263+U.S.+413&hl=en&as_sdt=80000000000002 ; D.C. Court of Appeals v. Feldman (1983) 460 U.S. 462 (Brennan; Stevens, dis)  http://scholar.google.com/scholar_case?case=8420410516192670182&q=D.C.+Court+of+Appeals+v.+Feldman+(1983)+460+U.S.+462+(Brennan%3B+Stevens,+dis)&hl=en&as_sdt=80000000000002  . 

You should consult with your Virginia bankruptcy or divorce lawyer concerning the possible application of the Rooker-Feldman doctrine to your contemplated litigation of family law matters in bankruptcy court.

Will the twenty year Virginia statute of limitations for judgments bar enforcement of an unliquidated, ongoing child support order from 1966 in 2008?

 No, the Court of Appeals of Virginia ruled in the case of Adcock v. Department of Social Services, Record No. 1681-09-4 (June 8, 2010) http://caselaw.findlaw.com/va-court-of-appeals/1526611.html, on appeal from the Circuit Court of the City of Alexandria. The parties divorced in 1966, and their divorce decree required husband to pay $30 per week in child support for three minor children, until the children attained their majorities, were otherwise emancipated, or the obligation was modified by court decree. In fact, the child support obligation terminated, according to its terms, on June 24, 1982, when the youngest child attained his majority.

 On June 14, 2006, mother applied for the services of the Virginia Department of Social Services, Division of Child Support Enforcement (hereafter DCSE) to enforce the October 20, 1966 child support order.  DCSE filed a case in the Virginia Circuit Court, asking the court to establish the arrearage and interest due on the unpaid child support.  The father did not dispute the arrearage amount due or the interest, but instead claimed that the Virginia statute of limitations of twenty (20) years for judgments under Va. Code §8.01-251(A) barred recovery. http://law.justia.com/virginia/codes/toc0800100/8.01-251.html   The father based his argument on Virginia Code Section 16.1-278.15(C), which provides that unpaid child support becomes a judgment by operation of law, and a lien against the obligor’s real property. http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+16.1-278.15 . The trial court ruled in favor of the wife and granted judgment against husband for $73,629 in child support arrearages. The husband appealed to the Virginia Court of Appeals.

 On appeal, the father contended that the twenty-year statute of limitations set forth in Code § 8.01-251 barred appellee’s enforcement of the 1966 child support order. DCSE, on behalf of the mother, argued that the twenty-year limitation only applies to a liquidated money judgment and not to an unliquidated ongoing support obligation. The Virginia Court of Appeals agreed with DCSE and the mother that Bennett v. Commonwealth, DSS, 15 Va. App. 135 (1992), controls. http://scholar.google.com/scholar_case?case=14498709982101585563&q=Bennett+v+Commonwealth+Dept+of+Social+Services&hl=en&as_sdt=80000000000004 .  In Bennett, the Virginia Court of Appeals concluded that the statute of limitations in Code § 8.01-252 (now 251) applies only to a judgment for a sum certain or liquidated amount for spousal support rendered in another state. If, however, the ongoing unliquidated foreign support order was reduced to a liquidated amount in Virginia, then the statute of limitations in § 8.01-251 would govern. Bennett made it abundantly clear that “no time limitation is placed upon the obligee spouse within which to obtain a judgment for accumulated arrearages.”

 The Court of Appeals concluded that the 20-year statute of limitations in Code § 8.01-251 only applies to a liquidated money judgment. In this case, the child support order was ongoing, rather than a liquidated money judgment, in spite of the fact that the total amount became ascertainable upon the youngest child reaching his majority. An ongoing support order “is not, and cannot be, a judgment for a sum certain or liquidated amount of money. Time and circumstances of the parties will determine ultimately the total amount to be paid under an initial, or subsequently modified, spousal support order.” Bennett v. Commonwealth, DSS, 15 Va. App. 135 (1992).  In Adcock, the statute of limitations provided in Code § 8.01-251 did not bar enforcement of the award and the judgment against the father was affirmed by the court.

You should consult with your Virginia family law attorney regarding whether the statute of limitations or the equitable doctrine of laches might bar enforcement of a family law obligation.

Can an individual Chapter 13 bankruptcy debtor strip off a second mortgage on nonresidential property owned by the debtor and his wife as tenants by the entireties?

Not in the case of In re Hunter, 284 B.R. 806 Bkrtcy.E.D.Va.,2002 http://scholar.google.com/scholar_case?case=6366726274960998195&q=284+B.R.+806&hl=en&as_sdt=80000000000002 where the United States Bankruptcy Court for the Eastern District of Virginia ruled that Chapter 13 debtor could not strip off a wholly unsecured, second-priority mortgage lien on non-residential real property owned by debtor and his nondebtor wife as tenants by the entireties.

In Hunter, the debtor filed an individual Chapter 13 petition in bankruptcy court and his wife did not join in the petition or file her own. Prior to confirmation of the plan, the debtor filed an adversary proceeding against creditor, seeking to avoid the second priority mortgage lien under 11 U.S.C. § 506(d), http://www.law.cornell.edu/uscode/uscode11/usc_sec_11_00000506—-000-.html The U.S, on real property in Pennsylvania that was not the marital residence.  The bankruptcy court judge addressed whether an individual debtor may avoid a lien, whether partially or wholly unsecured, on tenants by the entireties property, without his or her spouse. The court found no Fourth Circuit Court of Appeals precedent relating to either stripping off wholly unsecured mortgage liens in Chapter 13 or stripping off or stripping down undersecured mortgage liens on a debtor’s real property that is not the debtor’s primary residence.  The bankruptcy judge reviewed Pennsylvania’s law, where the subject real property was located, on tenancies by the entirety and found no basis for such relief.  Under Pennsylvania law, just as in Virginia, property held as tenants by the entireties is owned per tout et non per my, that is, each holds an undivided and indivisible interest in the entire property; neither spouse may unilaterally sever an estate held in the entireties.  A tenancy by the entireties is based on the legal fiction that a husband and wife are a single legal person.  As discussed in answer to the question, “Is my Virginia real estate vulnerable to creditors when I divorce?”,  http://bankruptcydivorceblawg.com/?page_id=43 , a tenancy by the entireties has a number of advantages over a tenancy in common for a married couple, including the right of survivorship, protection from creditors of one spouse alone, and the inability of either spouse to convey his or her interest without joinder of the other spouse.

In Hunter, the Bankruptcy Code provisions did not expressly support the debtor husband’s position, as noted by the Court:
The only provision permitting the severance of an entireties estate or a unilateral action by one co-tenant is § 363(h). This provision expressly provides that the “trustee may sell both the estate’s interest” and the co-owner’s interest. There is no authority for the debtor to sell the property under § 363(h). http://www.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00000363—-000-.html See, Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A, 530 U.S. 1, 7, 120 S.Ct. 1942, 1947, 147 L.Ed.2d 1 (2000) http://www.law.cornell.edu/supct/html/99-409.ZS.html Such a unilateral action is contrary to the essence of the tenants by the entireties estate and should not be permitted absent clear legislative authority.

The court noted that the debtor sought to provide his spouse with the benefit of having filed bankruptcy without her having borne the burden of a bankruptcy filing.  The Debtor husband sought severance of a portion of the entireties estate when his wife’s interest was in the whole of the property, per tout et non per my, and Pennsylvania law envisioned neither such a division of a tenancy by the entireties estate nor the unilateral severance of any portion of the entireties estate.

You should consult with a Virginia bankruptcy attorney regarding how your interest in tenants by the entirety property will be treated in bankruptcy.

Can attorney’s fees be considered a domestic support obligation in bankruptcy?

Yes, in the case of In re Uzaldin, 418 B.R. 166 (Bnkr. E.D.Va. 2009), http://scholar.google.com/scholar_case?case=10138662021474484029&q=in+re+uzaldin&hl=en&as_sdt=80000000000002 , where the United States Bankruptcy Court for the Eastern District of Virginia ruled that the prepetition final divorce decree’s award of attorneys fees to debtor’s former spouse was a domestic support obligation because the fees were awarded as part of the parties’ divorce litigation which included issues of child custody, spousal support, child support, and property settlement. See 11 U.S.C.A. § 101(14A) http://www.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00000101—-000-.html . This classification is important since domestic support obligations are entitled to priority status, are nondischargeable in every type of bankruptcy, and must be paid in full under a Chapter 13 plan. In contrast, property settlement and equitable distribution debts do not have priority, may be dischargeable in a Chapter 13 case (but not usually in a Chapter 7 case), and need not be paid in full in a Chapter 13 plan. See 11 U.S.C.A. § 507(a)(1) http://www.law.cornell.edu/uscode/usc_sec_11_00000507—-000-.html and 11 U.S.C. 523 http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t09t12+3832+0++%28%29%20%20AND%20%28%2811%29%20ADJ%20USC%29%3ACITE%20AND%20%28USC%20w%2F10%20%28523%29%29%3ACITE%20%20%20%20%20%20%20%20%20 .

In Uzaldin, the litigation arose out of the Debtor’s objection to the classification, but not amount, of the proof of claim filed by the Debtor’s ex-wife.   Notable in the divorce case had been the judge’s finding of marital waste by the Debtor through the transfer of assets to his mother and his voluntary underemployment.   The Debtor had allowed the marital residence to go to foreclosure with a loss of nearly $200,000 in equity.  The proof of claim consisted of $195,000 in equitable distribution for equity in the home, $30,000 in attorney’s fees and an offset of $5,500 for the wife’s share of a marital debt.  The judge ruled that the nature of attorney’s fees follows from the nature of the principal award.  There was no evidence that permitted the court to apportion the attorney’s fees between the custody, spousal support, and child support issues and the equitable distribution issues.    The bankruptcy judge ruled that where the Debtor presents no evidence on the nature of the attorney’s fees, then the former spouse’s proof of claim, executed and filed in accordance with the Federal Rules of Bankruptcy Procedure, constituted prima facie evidence of the validity and the amount of the claim under Bankruptcy Rule 3001(f), and controls http://www.law.cornell.edu/rules/frbp/rules.htm#Rule3001  .

Additionally, the Uzaldin court raised sua sponte whether this bankruptcy case had been filed in bad faith, in accordance with the court’s powers under 11 U.S.C. 105,  http://www.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00000105—-000-.html  . A Chapter 13 bankruptcy petition may be dismissed and a Chapter 13 plan may be denied confirmation if filed in bad faith. See 11 U.S.C.A. §§ 1307(c) http://www.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00001307—-000-.html .  Here, the Chapter 13 debtor’s objection to former spouse’s claim raised troubling questions about his good faith in both filing the petition and proposing the chapter 13 plan. The Uzaldin court restated the rule that it will not dismiss the bankruptcy petition for bad faith unless certain factors discussed in the Seventh Circuit’s Love decision were met including: the nature of the debt, whether the debt would be nondischargeable in a Chapter 7 proceeding, the timing of the petition, how the debt arose, the debtor’s motive in filing the petition, how the debtor’s actions affected creditors, the debtor’s treatment of creditors before and after the petition was filed, and whether the debtor has been forthcoming with the bankruptcy court and the creditors. In re Love, 957 F.2d 1350 (7thCir.1992). http://scholar.google.com/scholar_case?case=15943799145135414047&q=in+re+love&hl=en&as_sdt=80000000000002 .  Due to several of these factors being met, the court issued a notice to show cause why the case should not be dismissed for have been filed in bad faith.

 You should consult with your Virginia bankruptcy lawyer regarding the dischargeability of attorney’s fees arising out of your family law matters.

Must wife’s divorce complaint based on husband’s desertion allege a marital domicile in Virginia to satisfy long-arm jurisdiction?

Not necessarily, if the allegations support the requisite inferences for personal jurisdiction, the Court of Appeals of Virginia ruled in the case of Cabaniss v. Cabaniss, 46 Va.App. 595, 620 S.E.2d 559 (Va.App., 2005) http://scholar.google.com/scholar_case?case=10119698254656108671&q=cabaniss+v+cabaniss&hl=en&as_sdt=80000000000004.

The wife filed a divorce in Virginia against the nonresident husband alleging willful desertion and abandonment and requesting divorce, spousal support and equitable distribution.  The husband was served in Canada after residing in the West Indies. Husband’s argued that the complaint did not sufficiently state that the parties had been maintaining a matrimonial domicile at the time they separated, as required by the long-arm statute (8.01-328.1(A)(9)). http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.01-328.1  and therefore the court did not have personal jurisdiction over him.   He entered a special appearance objecting to the exercise of long-arm jurisdiction over him.  The Virginia divorce court judge overruled husband’s objection and husband did not participate further in the case, other than to note his objection to the order.  The wife obtained a divorce, equitable distribution of marital property, spousal support and her legal fees and costs.  Husband appealed.

In Cabaniss, the Virginia Court of Appeals held that personal jurisdiction could be exercised over the non-resident husband based on the allegations in wife’s complaint for divorce.  The court noted that a divorce could be entered based on in rem jurisdiction alone, but an order affecting a party’s property interest, such as support or equitable distribution, required in personam jurisdiction.  In this case, the divorce judge did not err in finding personal jurisdiction over husband pursuant to the long-arm statute based on allegations in wife’s complaint that  i) husband deserted her on specific date; ii) husband’s desertion had continued since that date without interruption and husband has not returned to the matrimonial domicile iii) wife was domiciled in and a bonafide resident of Virginia; iv) husband lived abroad; v) the parties last cohabitated in Lexington, Virginia; and v) husband, while abroad, called wife and informed her that marriage was over and he wanted a divorce.

It is true that the long-arm statute requires the complaint to allege that Virginia was the matrimonial domicile at the time of separation “or other relevant time under the statute.” Although the wife’s complaint did not use precise wording, the Virginia Court of Appeals held that the husband could not mistake the true nature of the claim, which could be drawn from the requisite inferences of the allegations. The appellate court reasoned that when the allegations of the complaint are read together they add up to sufficient allegations that the parties were maintaining a Virginia domicile at both time of separation and time cause of action for desertion arose.   Because of his conduct and connections with the Commonwealth of Virginia, the husband could reasonably anticipate being subject to the jurisdiction of the court.

As an aside, the Court of Appeals noted that a demurrer is the more appropriate defensive pleading for a jurisdictional challenge that is limited to the face of the complaint. A demurrer reaches defects as appear on the face of the pleading demurred to, i.e. failure to state a cause of action. Since the Husband had failed to file a demurrer to the complaint for divorce, the court was charitable to even to consider his case.

You should consult with your Virginia divorce lawyer concerning whether the court can exercise long-arm jurisdiction over your non-resident spouse.

Will personal service on nonresident husband in Virginia support a divorce decree?

 Yes, Court of Appeals of Virginia ruled in the case of Ragouzis v. Ragouzis, 10 Va.App. 312, 391 S.E.2d 607 (1990) http://scholar.google.com/scholar_case?case=1292801830624636393&q=Ragouzis+v.+Ragouzis&hl=en&as_sdt=80000000000002, provided the court has long-arm jurisdiction over the defendant.   While residing in another state, a husband and wife separated and wife filed a divorce action there. The wife then moved with her child to Pulaski County, Virginia.  Approximately five months later, the wife filed a second bill of complaint for a divorce in the City of Radford, Virginia, which she believed, in good faith, was her husband’s place of residence because he was occupying an apartment there. The caption of the bill of complaint contained the husband’s Radford address. The sheriff served the husband when he answered the door at his Radford apartment.

 The City of Radford, Virginia, Circuit Court found that husband routinely visited Radford to conduct business but that he had retained his permanent residence and domicile in Ohio. Hence, the court found he was a resident of Ohio. Because husband was a non-resident and the wife was a resident of Pulaski County, Virginia, under Code § 20-96(B), http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-96  then in effect, venue was proper in Pulaski County. Pursuant to the provisions of Code § 20-96(C), the Radford Circuit Court transferred the case to the Pulaski County Circuit Court, which is in the same judicial circuit as the City of Radford. By decree of the Pulaski County Circuit Court, the wife was granted a divorce.  The decree did not address child custody, visitation, child support, spousal support, or equitable distribution.

 On appeal, the husband contended that the trial court lacked jurisdiction over him because the service on him, a nonresident did not conform to Virginia Code § 8.01-328.1, the long arm statute.  Virginia has a long arm jurisdiction statute in Code Section 8.01-328.1 that allows Virginia to exercise jurisdiction over a person in another state when that person has certain connections to the Commonwealth of Virginia. http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.01-328.1  Particularly relevant to divorce cases, these connections include owning real estate in Virginia, executing a support agreement in Virginia, being ordered to pay spousal or child support by a court in Virginia that has personal jurisdiction, fathering or conceiving a child in Virginia, or having a marital domicile in Virginia prior to separation. Additionally, husband also claims that the Circuit Court of Pulaski County lacked subject jurisdiction under Code § 20-96 because the case was transferred to it by a court without jurisdiction.

 The Virginia Court of Appeals ruled in favor of the wife. The court noted that the Virginia long arm statute provides additional methods of service on nonresident defendant, not exclusive methods of service, and does not supplant previously authorized methods of personal service provided by law. Code 1950, § 8.01-328.1. http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.01-328.1.   The Virginia Court of Appeals found that service through the Secretary of the Commonwealth was not the exclusive method for service of process under the Virginia long-arm statue and that, generally, personal service on a nonresident in Virginia is valid and will support a personal judgment against that nonresident.  Further, in regards to husbands’ second contention, the court ruled that the Radford Circuit Court had potential subject matter jurisdiction to hear the divorce case, and therefore, had jurisdiction to transfer case to a court which was the proper venue once the court acquired personal jurisdiction over husband by personal service upon him during routine business trip. See Temple v. City of Petersburg, 182 Va. 418, 29 S.E.2d 357 (1944). http://scholar.google.com/scholar_case?case=14977558172437297767&q=%22Temple+v.+City+of+Petersburg%22&hl=en&as_sdt=80000000000002 .

 It should be noted that all circuit courts within the Commonwealth of Virginia have potential subject matter jurisdiction to try divorce cases.  Preferred venue in divorce, annulment, and affirmance cases is the county or city where the parties last resided, the county or city where the defendant resides, if a resident of Virginia, or when the defendant is served by order of publication, the city or county in which the plaintiff resides, under Section 8.01-261(19) of the Code of Virginia, http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.01-261 .

 You should consult with your Virginia divorce lawyer to determine whether jurisdiction exists for a divorce proceeding and what would be the proper venue for your case.