7th Probate Court for the County of Charlevoix v. Erfourth (In Re Erfourth)

Citations: 126 B.R. 736; 1991 Bankr. LEXIS 629; 1991 WL 73662Docket: 16-00760

Court: United States Bankruptcy Court, W.D. Michigan; May 1, 1991; Us Bankruptcy; United States Bankruptcy Court

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The United States Bankruptcy Court for the Western District of Michigan ruled on May 1, 1991, regarding the dischargeability of debts owed by Douglas D. Jo Ann Erfourth to the 7th Probate Court for the County of Charlevoix, under 11 U.S.C. 523(a)(5). The court found the debt to be dischargeable following an agreement between parties to submit the legal issue without a trial, as there were no factual disputes.

The case involved the couple's son, Douglas Benjamin Erfourth, who faced multiple juvenile charges throughout the 1980s, leading to his status as a temporary ward of the court. The court issued several orders regarding the Debtors' financial responsibilities for Douglas' rehabilitation, starting with a $10.00 monthly payment that later increased to $400.00 per month upon the termination of the court’s jurisdiction. 

By the time the Debtors filed for Chapter 7 bankruptcy on January 7, 1990, the juvenile court had determined that the total costs incurred during Douglas' court involvement amounted to $17,753.37, with the Debtors responsible for $15,000.00. The discrepancy in payment schedules from the juvenile court raised questions about the rationale behind the differing amounts.

The Debtors have an outstanding balance of $14,600.00, which includes $14,414.25 in costs incurred by the Department of Social Services and $185.75 in attorney fees. They had previously made a $400.00 payment and are ordered to make monthly payments of $290.00, but have not paid anything since. The juvenile court initiated proceedings on July 26, 1990, to assess the dischargeability of this debt under 11 U.S.C. § 523(a)(5), which pertains to obligations for alimony, maintenance, or support to a spouse, former spouse, or child.

The juvenile court contends that the Debtors have a financial support obligation to their son, which has been established through court-ordered services. The court argues that this obligation is nondischargeable under § 523(a)(5)(A), as it is a support obligation owed directly to the child. The Debtors, however, argue that the debt is dischargeable because it is owed to the court rather than directly to their child, thus falling outside the scope of § 523(a)(5). They concede their parental duty to support their son but assert that no valid assignment exists which would render the debt nondischargeable.

Both parties agree on the Debtors’ obligation to support their son, as mandated by Michigan law (Mich. Comp. Laws Ann. § 722.3(1)), which stipulates that parents are jointly responsible for supporting their minor child unless modified by a court. Failure to provide support could allow the minor or designated representatives to enforce this obligation through legal action.

Douglas' financial support was not solely provided by his parents; the Department of Social Services incurred costs related to his court involvement, which are recoverable from either Douglas or the Debtors. Douglas had a right to legal counsel during juvenile court proceedings, and due to his family's financial limitations, the court appointed an attorney for him, ordering the Debtors to cover the fees. Douglas was placed alternately in his parents' home and a group home, with the court required to order reimbursement for the costs incurred during group home confinement. The court mandated that the Debtors be responsible for these costs, totaling $14,600.00, comprised of $14,414.25 for group home placement and $185.75 for attorney fees. The juvenile court did not assign sole or joint responsibility for these costs to Douglas, distinguishing this case from In re Calhoun, where the debtor agreed to assume joint debts. The central issue is whether the obligation to reimburse the juvenile court on Douglas' behalf is nondischargeable under 11 U.S.C. § 523(a)(5). The court in Calhoun ruled that support obligations do not need to be payable directly to a spouse to be considered nondischargeable. In contrast to Calhoun, where the debtor's spouse was still liable for debts, Douglas was not held liable by the juvenile court for the ordered payments.

Douglas has the right to seek support from his parents under Mich.Comp. Laws Ann. 722.3(2); however, any debt related to support is owed to the juvenile court, not to Douglas. This debt is dischargeable unless a valid assignment exists. Under 11 U.S.C. § 523(a)(5)(A), support debts can only be assigned to the federal government, state government, or a political subdivision, which includes the juvenile court, but no valid assignment is present in this case. Previous court opinions have established that state assignments of child support obligations, enacted when parents seek assistance, do not prevent these obligations from being dischargeable. In 1975, an amendment to the Social Security Act made child support obligations assigned under this act nondischargeable for cases filed after July 1, 1975. Although this provision was repealed when the new Bankruptcy Code was enacted, Congress later amended § 523(a)(5)(A) in 1981 and 1984 to make certain child support obligations nondischargeable, but only if valid assignments exist. The state statutes do not permit assignments of support rights to the juvenile court, and the Order of Reimbursement from February 8, 1990, does not create such an assignment. Therefore, without a valid assignment from Douglas to the juvenile court, the debt is considered a third-party debt and is dischargeable. The obligation of $14,600.00 is declared dischargeable as it does not meet the criteria of § 523(a)(5).