Mothers Owed Child Support Can Be Denied Priority Creditor Status
By: Gabrielle G. Pullo
St. John’s University School of Law
American Bankruptcy Institute Law Review Staff Member
According section 507(a)(1)(A) of title 11 of the United Sates Code (the “Bankruptcy Code”) provides that domestic support obligations owed to or recoverable by a spouse, former spouse, child of the debtor, or such child’s parents, are entitled to first priority status during distribution of the bankrupt debtor’s estate regardless of whether the claim is filed by such person or is filed by a governmental unit.[i] In Pate v. Tow, the United States Court of Appeals for the Fifth Circuit held that two mothers’ child support claims against Daniel Pate (the “Debtor”), the father of their respective children, were not entitled to priority.[ii] Alisha Pate and Yvonne Clark-Thigpen, the mothers of the Debtor’s children, both depended on the Illinois Department of Healthcare and Family Services (the “Illinois Department”) to collect their child support payments from the Debtor.[iii] Following the Debtor’s filing of a petition for relief under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, a trustee was appointed.[iv] The trustee notified the Illinois Department – not Pate or Clark-Thigpen – of the Debtor’s pending bankruptcy case.[v] The women independently learned of the Debtor’s bankruptcy and subsequently contacted the Illinois Department,[vi] which filed proofs of claim on behalf of the women, listing the Illinois Department as the creditor.[vii] The trustee objected to the proofs of claim as tardily filed and therefore not entitled to priority status, which the bankruptcy court sustained.[viii] On Pate and Clark-Thigpen’s appeal, the District Court affirmed the previous decision.[ix]
The United States Court of Appeals for the Fifth Circuit affirmed the District Court’s decision to deny the women priority status under section 726(a)(1) of the Bankruptcy Code, explaining that they were not creditors of the Debtor and were, therefore, ineligible for priority status.[x] Under Illinois law, if an obligor opts into the Illinois Department’s support collection services, the right to then enforce and collect the Debtor’s child support obligations lies exclusively with the Illinois Department.[xi] Here, Pate and Clark-Thigpen utilized the Illinois Department’s support enforcement services and in doing so, effectively relinquished their standing as priority creditors.[xii]
Under Section 507(a)(1)(A) of the Bankruptcy Code, creditors with domestic support obligations are given the highest priority in bankruptcy cases.[xiii] It is well established that a “creditor” is an entity with a claim against a debtor.[xiv] However, the court in Fezler v. Davis expands the definition of a creditor, stating that a creditor can also be “an entity with [authority] to prosecute and collect a claim against the debtor, even if other persons are entitled to ultimate payment on the claim . . ..”[xv] In Fezler v. Davis, the court specifically referenced government agencies and explained that “administrative agencies by virtue of their authority to enforce the administrative law are creditors” regardless of the fact that they are not the debt-payment recipient.[xvi] There, the Court of Appeals for the Fifth Circuit held that the administratix of an estate was eligible to bring adversary proceedings as a creditor because of her “statutory authority to prosecute and collect a claim against the debtor.”[xvii] Therefore, one’s right to receive a debt payment (such as a child support payment) is not determinative of creditor status – the ability to enforce said debt is.
The court’s decision in Pate v. Tow reinforces the precedent established by the Fifth Circuit in Fezler v. Davis as well as further clarifies the expansive applicability of creditor standing. The women’s right to a significant amount in child support owed by the Debtor is rooted in state law. However, once the debtor filed for bankruptcy, the federal laws of bankruptcy applied. Therefore, the women’s right to be paid was no longer dispositive to the court’s analysis; instead, the court considered where enforcement power lied. Because the women had sought assistance from the Illinois Department, which maintains absolute enforcement power, the women’s priority creditor statuses were preempted.
[i] 11 U.S.C. § 507(a)(1)(A) (2012).
[ii] Pate v. Tow (In re Daniel Clark), 921 F.3d 566, 572 (5th Cir. 2019).
[iii] Id. at 568–69.
[v] Id. at 569.
[x] Id. at 572.
[xi] See 750 Ill. Comp Stat. 5/507.1.
[xii] Pate, 921 F.3d at 568–69.
[xiii] 11 U.S.C. § 507(a)(1)(A) (2012).
[xiv] 11 U.S.C. § 101(10) (2012).
[xv] Fezler v. Davis (In re Davis) 194 F.3d 570, 576–77 (5th Cir. 1999).
[xvi] Id. at 575.
[xvii] Id. at 579.