Menu   5 ABR 11

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

In re

EMIL C. JOHNSON,
                                 Debtor(s)

Case No. F96-00219-HAR
Chapter 13


MEMORANDUM DECISION DISALLOWING
CLAIMS OF STATE OF WASHINGTON
DSHS

1. DSHS CLAIMS DISALLOWED AS UNTIMELY-

1.1. Debtor's Objection to DSHS's Claim- The debtor filed an objection (Docket Entry 25, filed November 25, 1996) to Proof of Claim No. 4, which was filed by the debtor on behalf of the State of Washington, Department of Social and Health Services, Division of Child Support (DSHS). This is a priority claim filed by the debtor for $100. The claim was amended by Proof of Claim No. 5, filed December 16, 1996, in the amount of $4,492.84 as a priority claim for the payment of support.

The priority is apparently based on 11 USC § 507(a)(7). There is an unexplained difference in 11 USC § 507(a)(7) (dealing with priority of distribution of spousal support claims) and § 523(a)(5) (dealing with their dischargeability). For some reason, § 507(a)(7) excludes assigned claims, whereas § 523(a)(5) includes spousal support claims assigned to a state for collection. See, 4 Collier on Bankruptcy, ¶ 507.09[ 2] (15th ed). DSHS may not be a priority creditor. But, see, In re Beverly, 196 BR 128 (Bankr WD Mo 1996), in which the court held that a non-dischargeable chapter 13 support claim was a priority claim, even though it had been assigned for collection to a state agency.

In any event, the court will treat the debtor's objection as applying to both Proofs of Claim Nos. 4 and 5. The objection is based on two grounds: (a) that the proof of claim was untimely and (b) that the debtor is a stepfather who is not within the ambit of RCW 26.16.205.

1.2. The Claims Were Not Timely Filed- On the first grounds, that the claim was untimely, the debtor prevails. The case was filed on March 26, 1996. The governmental unit had 180 days after the order for relief (the petition date) to file, or until September 23, 1996. FRBP 3002(c)(1).

Nor can DSHS rely on a defense of "excusable neglect" to get around 5 ABR 12   TOP   the time limit. Excusable neglect is not available to a chapter 13 creditor (with some exceptions, not involved here). FRBP 3002(c), FRBP 9006(b)(3) [ limiting extensions to those specifically set out in FRBP 3002(c)] , and Pioneer Investment Services Co. v Brunswick Assocs. Limited Partnership, 113 SCt 1489, 1495 fn4 (1993).

In chapter 7, a priority creditor can still receive a distribution based on a tardy claim, if it is filed before the trustee commences distribution. 11 USC § 726(a)(1). There does not seem to be a comparable leniency for chapter 13 priority creditors, so far as sharing in the distribution from the estate.

1.3. The Court Does Not Decide on the Merits of DSHS's Claim for Stepparent Support- As to the second grounds alleged by debtor for disallowance of the claim, the court does not have enough information upon which to rule. RCW 26.16.205 provides:

The expenses of the family and the education of the children, including stepchildren, are chargeable upon the property of both husband and wife, or either of them, and they may be sued jointly or separately. When a petition for dissolution of marriage or a petition for legal separation is filed, the court may, upon motion of the stepparent, terminate the obligation to support the stepchildren. The obligation to support stepchildren shall cease upon the entry of a decree of dissolution, decree of legal separation, or death.

In reviewing the annotations to this section, at least some of the cases, and the most recent one, Harmon v. Department of Social and Health Services, 922 P2d 201 (Wash App. 1996), give the statute a literal reading. Harmon says that one of the three conditions for absolving a stepparent has not occurred (death, a decree of dissolution, or a decree of legal separation), the stepparent is not absolved of the support obligation, even if the marriage has broken up and the child is living with the natural parent.

1.4. A Question About Notice May Still Exist- I will allow DSHS 30 days to seek reconsideration if they wish to raise the issue of lack of notice. After the hearing, I noticed that the address debtor used on the matrix and the Proof of Claim No. 4 which debtor filed was "101 King Street, Seattle, WA 98104." The DSHS used PO Box 9209, Olympia, WA 98507-9209 on Proof of Claim No. 5, which it filed.

5 ABR 13   TOP   If the debtor used the wrong address on the matrix, the court will reconsider whether the late-filed claims should allowed on due process grounds. See, In re B.C. Enterprises, Ltd., 160 BR 827, 830 (Bankr D. Ariz 1993). If on the other hand, DSHS knew of the proceeding in time to file a timely proof of claim, lack of formal notice may not be a defense to DSHS. In re Gregory, 705 F2d 1118 (9th Cir 1983); In re Coastal Alaska Lines, Inc., 920 F2d 1428 (9th Cir 1990).

2. DISALLOWANCE OF DSHS'S CLAIM DOES NOT EQUATE WITH DISCHARGEABILITY- Although DSHS may not have filed a claim in time to participate in the distributions of the plan, the claim, if it is espousal support, will not be discharged.

11 USC § 1328(a) provides that, upon completion of the plan, a discharge will be entered except for debts whose payments extend down the life under § 1322(b)(5) and those kinds of debts described in § 523(a)(5), (8) or (9). A spousal support debt under § 523(a)(5) thus is nondischargeable even though it may not have been timely filed. 8 Collier on Bankruptcy, ¶ 1302.02[ 3] (c) (15th ed).

A tardy priority tax debt is not treated the same in chapter 13 as a § 523(a)(5) spousal support claim. A late-filed tax claim will generally both not participate in the chapter 13 distribution and be discharged but, the discharge is only if there is a full complaince discharge under 11 USC § 1328(a). If there is a hardship discharge under § 1328(a) or a chapter 7 discharge under § 727(a), the tax claim is not discharged pursuant to the language in the preamble of §523(a) ("A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt . . . "). The IRS must, therefore, be on its toes to file a timely proof of claim in a chapter 13 case, or it can possibly lose its claim. See, In re Osborne, 76 F3d 306, 307 (9th Cir 1996), decided under the law before the 1994 Bankruptcy Reform Act, but noting that under the 1994 Act (which governs this case) a tax claim in chapter 13 can be lost if a proof of claim is not timely filed.

The statutory framework for § 523(a)(5) claims is different, however, and failure to file a timely claim does not discharge the debt. The quandary is what to do with the undischarged debt during the 3 years the plan is in effect. One option is to stay enforcement until the case 5 ABR 14   TOP   is over. The 9th Circuit BAP does not favor a stay against a nondischargeable support claim. In re Pacana, 125 BR 19 (9th Cir BAP 1991). I determined that I would only stay enforcement for a brief period to allow the debtor to bring a proceeding to determine dischargeabiltiy.

I indicated that the court would only confirm the plan if a stay is lifted to allow the State of Washington to pursue its collection unless somebody brings a dischargeability action to establish nondischargeability of all its espousal support. In a sort of compromise, the court agreed that the stay would be lifted prospectively 60 days after confirmation, but remain in effect if somebody brings a dischargeability action within that time period until that dischargeability action has been heard.

    DATED:    May 14, 1997

                HERBERT A. ROSS
                U.S. Bankruptcy Judge