Are divorce court contempt proceedings always a violation of the bankruptcy automatic stay?
It depends on the type and timing of the contempt proceedings. In the case of In re Dill, 300 B.R. 658 (Bankr. E.D. Va., 2003), a husband and wife had entered into a property settlement agreement in which the spouses agreed not to incur further obligations on any joint accounts. The separation agreement was incorporated into the final decree of divorce in the Virginia Circuit Court. The husband incurred additional charges after the final decree of divorce was entered, then filed a chapter 7 bankruptcy listing wife as one of his creditors. The wife filed a motion to show cause why the husband should not be held in contempt of court by the divorce court judge. The Virginia Circuit Court divorce judge found the husband had violated the divorce order and held him in civil contempt of court. The divorce court judge threatened to jail the husband unless he paid wife for the charges he incurred on the credit card and her attorney’s fees. The husband filed a motion for sanctions against wife and her attorney in the bankruptcy court for violating the automatic stay and/or the bankruptcy discharge injunction. The wife defended the motion by claiming that she was not a creditor, that the obligation arose after the bankruptcy was commenced (not a pre-petition debt) when the husband was found in contempt, and that she was not collecting a debt, but merely seeking a remedy for the breach of the property settlement agreement.
The bankruptcy court judge held that the wife was a creditor because she had a claim as defined in the bankruptcy code: a cause of action or right to sue the husband for breaching the property settlement agreement. The judge further held that the automatic stay protects a debtor from the commencement or continuation of an action to collect a prepetition debt and that the wife had commenced a judicial proceeding prior to the bankruptcy case, even though husband was not held in contempt until after the filing. The judge also held that there is no real legal distinction between seeking a remedy from a breach of contract and collecting on a pre-petition debt.
In an extraordinary part of the opinion, the court went on the repackage the wife’s defense into the real issues in the case as the judge saw it (even though the wife had not raised them): the nature of the debt and the relationship between state court contempt proceedings and the automatic stay. The judge found that the breach of the property settlement agreement was not in the nature of support so it was not the type of debt that could be collected during the bankruptcy, because the support obligation in the agreement was made without regard to the amount that the debtor later wrongfully charged on the joint account. The court distinguished between two types of contempt proceedings: a punitive contempt order that upholds the dignity of the court, or criminal contempt; and a coercive contempt order that vindicates the private rights of private litigants, or civil contempt. In this case, the judge found that the contempt proceeding involved a civil contempt order between private litigants to vindicate a private right, of which the debtor husband could purge himself by paying his wife back for his wrongful charges. As such, the wife’s commencement, continuation and prosecution of these contempt proceedings during the bankruptcy case was a violation of the automatic stay.
You should consult with your bankruptcy or divorce lawyer regarding the continuation of your divorce proceedings during a bankruptcy proceeding by your spouse.