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Orange County Mother Wins Ninth Circuit Ruling in Bankruptcy Case

12 Aug 2016 11:06 AM | OCHBA Administrator (Administrator)

In published opinion, the Ninth Circuit Court of Appeals reverses judgment of the
Bankruptcy Appellate Panel and raises concerns over the County's actions

Santa Ana, CA - The U.S. Ninth Circuit Court of Appeals concluded on August 10, 2016 that a mother's debt to Orange County arising from her son's involuntary juvenile detention is not a "domestic support obligation" and thus excepted from discharge in bankruptcy. Brett H. Ramsaur and Todd E. Lundell of Snell & Wilmer briefed and argued on Ms. Rivera's behalf in front of the Court of Appeals after Caroline Djang of Rutan & Tucker briefed the trial court case. PLC's Leigh Ferrin and EmmaElizabeth Gonzalez served as co-counsel throughout the case, including briefing and arguing before the trial court and the Bankruptcy Appellate Panel.
"This is huge win for not only our client but countless 'honest but unfortunate' debtors in Orange County and throughout the Ninth Circuit," said Ferrin, Directing Attorney of PLC's Consumer Law Unit.
In the published opinion, the panel reversed the judgment of the Bankruptcy Appellate Panel, which had affirmed the bankruptcy court's denial of Ms. Rivera's motion to sanction Orange County for persisting post-discharge in its efforts to collect the debt. Upon her son's release from detention, the County sent Ms. Rivera a bill for $16,372. Ms. Rivera sold her house to pay for $9,508 of the bill, and her ex-husband paid the bill down further.
Ms. Rivera, who had to quit her job to take care of her ill son, filed a chapter 7 bankruptcy case and received her discharge. Nevertheless, the County continued to hound Ms. Rivera with collection-agent type tactics. The panel noted that "in relentlessly pursuing [Ms. Rivera's] collection and opposing its discharge, the County raises yet another obstacle to [Ms.] Rivera's efforts to provide her son with the support about which the County claims to be so deeply concerned."

While Brett Ramsaur of Snell & Wilmer is ecstatic with the outcome, he is particularly proud of the relief it will provide Maria, saying "we are grateful for the opportunity to fight for Maria in front of the Ninth Circuit and couldn't be happier with the result."
The Ninth Circuit Court of Appeals concluded that the Bankruptcy Code Amendments of 2005 did not "change the fundamental requirement that Domestic Support Obligations be for the purposes of child or family support." The panel further explained that Ms. Rivera "incurred her debt through no fault of her own. It was her son's actions, not hers, that led to his detention in juvenile hall, and thus his actions, not hers, that enabled the County to burden her with this debt. Nevertheless, in the wake of her child's incarceration, Ms. Rivera made a good faith effort to pay her bill [and] paid over half of it at great personal sacrifice. Rivera's debt thus arises in precisely the circumstance in which the Bankruptcy Code seeks to provide a fresh start."
Caroline Djang of Rutan & Tucker summed it up when she said "Rutan could not have asked for a better result for Ms. Rivera. Not only does the opinion vindicate our argument, i.e. that the debt to the County did not fit within the spirit of the law excepting 'domestic support obligations' from discharge, but it also states in no uncertain terms that the County acted in a manner contrary to the objectives of the Bankruptcy Code. Every now and then in this profession, we encounter a truly "feel-good" win. This is one of those wins."  

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