In a recent ruling, the Bankruptcy Court for the Southern District of Georgia, ordered relief from the Automatic Stay allowing a contentious family law case in the Superior Court to move forward. Debtor filed a Chapter 11 reorganization bankruptcy, In Re: J. Timothy Shelnut (case no.: 17-40113).

Brief Overview of the Divorce & Family Law Case in Superior Court

In a particularly egregious family law case, the Debtor, J. Timothy Shelnut, was found in civil and criminal contempt of court, sentenced to jail time, and ordered to pay back monies owed to his former-spouse, Virginia “Sam” Pannill (formerly known as Virginia Shelnut). In the first contempt proceeding against Debtor, the Superior Court incarcerated Mr. Shelnut until he paid Ms. Pannill the $199,675.00 alimony arrears he owed her. The Court found that Mr. Shelnut had the ability to pay, but opted to financially favor himself and others over his court-ordered obligations. In the second contempt proceeding, the Supierior Court awarded Ms. Pannill $375,086.59 for various things that were due to her under the settlement terms of the divorce.

Brief Overview of The Bankruptcy Court’s Ruling

In this case, the Bankruptcy Court ruled on Ms. Pannill’s Emergency Motion requesting the court “to Abstain, or in the Alternative, for Modification of the Automatic Stay, or a Determination that the Automatic Stay is Not Applicable Under 11 U.S.C. §362(b)(1) and (2).” (Id. 1)

The Bankruptcy Court ruled in Ms. Panill’s favor and stated “the Court ABSTAINS from this matter and relief from the §362 automatic stay is ORDERED GRANTED to Ms. Pannill as to these matters[.]” (Id. 25)

In its ruling, the Bankruptcy Court abstains from the family law matter pending in the Superior Court. The Bankruptcy Court upheld precedent in Carver v. Carver, finding “the Superior Court has a strong state interest in domestic relation matters and given the facts and circumstance of this case, it is appropriate for this Bankruptcy Court to abstain from considering this matter in the interest of justice and comity with the state courts and out of respect for state law. (Id. 14, citing Carver , 954 F.2d 1573 (11th Cir. 1992))

The Bankruptcy Court also lifted the Automatic Stay in Debtor’s bankruptcy case, which allows the case in Superior Court to move forward even while his bankruptcy case is pending. In his Chapter 11 case, Debtor will propose a Chapter 11 plan to pay his creditors, including the debts that he owes to his ex-wife. If the Bankruptcy Court allowed this, it would allow Debtor to circumvent the terms ordered by the Superior Court for Mr. Shelnut to pay the debts owed to his ex-wife.

The Takeaway

Any case in which the Bankruptcy Court lifts the Automatic Stay is important to understand. The Automatic Stay takes effect as soon as a bankruptcy case is filed. It precludes creditors from taking collection action and it also halts pending law suits and court cases.

In In Re: Shelnut the Bankruptcy Court abstained from hearing the family law matter, deferring to the Superior Court, and lifted the Automatic Stay in regard to the case pending in Superior Court. The Debtor, having been found to be “using this bankruptcy as a weapon in an ongoing domestic battle with his former spouse,” will not have the protection of bankruptcy in regard to his domestic support obligations. (Id. 24)

It is important to note that domestic support obligations, including back spousal and child support, are not dischargeable in bankruptcy. This means that these debts survive bankruptcy and must be paid back in full regardless of any bankruptcy filing.

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