At least in the Fifth Circuit, a lump-sum child-support award will not give rise to an allowable claim if the debtor was current in payments before bankruptcy.
Five years before the husband’s involuntary chapter 7 bankruptcy, the couple divorced. Along with the divorce decree, the state court called for $2,600 a month in child support. Also before bankruptcy, the state court reduced child support to $1,700 a month.
Three months after the order for relief, the state court entered a lump-sum child support order requiring the husband-debtor to pay about $165,000 for all “current and future child support.” The state immediately filed a claim for the entire amount, contending it was entitled to priority under Section 507(a)(1)(A) and (B).
The trustee and several creditors objected to allowance of the claim. Bankruptcy Judge Craig A. Gargotta of San Antonio sustained the objections in a May 12 opinion, thus not needing to decide whether the claim was entitled to priority.
Pivotally, Judge Gargotta said that the “filed claim did not bifurcate between the amount of child support due as of the date of filing the bankruptcy petition and any post-petition child support that would arise in the future.” He also said that the state provided no documentation to indicate “the amount of support due” at the outset of bankruptcy.
Citing Section 101(14A)(A)(i), which defines a domestic support obligation to include a debt that “is owed to or recoverable by a spouse,” the state contended that the claim was allowable under the “conduct theory” regardless of whether the support obligations were pre- or post-filing.
Judge Gargotta rejected the argument, because the Fifth Circuit had opted for the “prepetition relationship test” rather than the conduct theory. The Fifth Circuit’s test provides that “a claim arises at the time of the debtor’s negligent conduct forming the basis for liability only if the claimant had some type of specific relationship with the debtor at the time.” The appeals court went on to say that a claim would not be prepetition when there was no “evidence of any prepetition contact, privity or other relationship” between the parties.
Judge Gargotta said the claim was not allowable under the “plain language of Section 502(b)(5),” which disallows a claim for a domestic support obligation that was not “matured” on the date of filing. Because the state “provided no documentation to prove there was any prepetition breach of obligation warranting an acceleration of the child support obligation,” he rebuffed the state’s attempt “to retroactively make this lump sum a prepetition debt [as it] applied the wrong test [by not] using the conduct theory.”