Debt for Overpayment of DSO not Itself DSO

Posted by NCBRC - July 9, 2019

Debts based on overpayments to debtors for government welfare benefits are not non-dischargeable domestic support obligations. Dennis v. Illinois Dept. of Human Serv., Nos. 18-2899, 18-2952 (7th Cir. June 27, 2019).

Chapter 13 debtor, Devan Dennis entered bankruptcy owing the Illinois Department of Human Services for overpayments under the state Child Care Assistance Program. Chapter 7 debtor, Tyeane Halbert, owed the DHS for overpayments of her SNAP benefits. The bankruptcy court rejected the DHS’s argument that the overpayments were non-dischargeable domestic support obligations under section 507(a)(1)(B) and DHS appealed.

NACBA filed an amicus brief on behalf of the debtors.

On direct appeal, the Seventh Circuit agreed with the bankruptcy court. Section 101(14A)(B) defines “domestic support obligation” as “in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) [to a] spouse, former spouse, or child of the debtor . . ..” In this case, the debts to the DHS were not in the nature of alimony, maintenance or support, they were repayments based on erroneous payments. The debts were owed to the creditor rather than the recipient of domestic support. Like In re Vanhook, 426 B.R. 296, 301 (Bankr. N.D. Ill. 2010), where the creditor had erroneously made child support payments for a child later determined not to be his, the debt created by that mistake was not itself a domestic support obligation but was merely a refund. The court, citing 2 Collier on Bankruptcy ¶ 101.14A, at 96.1, noted that because most payments by the government are for support of some kind, the DHS’s position would unduly expand the definition of domestic support obligation. The court agreed with other courts finding that even though the funds paid to the debtors were in support of the debtors’ children, the claims by the DHS were for “a debt for the return of a benefit paid to the debtor that should not have been paid in the first place,” and were, therefore, not likewise in the nature of a domestic support obligation.

Post a Comment

Your email is never shared. Required fields are marked *