Sixth Circuit Bankruptcy Appellate Panel Confirms Guardian ad Litem Fees are Non-Dischargeable

In November 2012, the Sixth Circuit Bankruptcy Appellate Panel affirmed the decision of the Bankruptcy Court for the Southern District of Ohio in Kassicieh v. Battisti (In re Kassicieh), 2012 FED App. 0011 (BAP 6th Cir. 2012). The case held that fees owed to a court appointed Guardian ad Litem constitute a domestic support obligation and are therefore considered non-dischargeable in bankruptcy.

Section 523 of the bankruptcy code lists the exceptions to discharge. These are debts that a debtor will still be personally liable for after his/her bankruptcy case has been discharged. One of the areas that Congress has deemed to fall under this category is Domestic Support Obligations. Section 523(a)(5) states “…a discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual from any debt – (5) for a domestic support obligation.” A Domestic Support Obligation (DSO) is defined in Section 101(14A) of the code:

• A debt owed or recoverable by a spouse, former spouse or child of the debtor, legal guardian for the child, or responsible relative or a governmental unit
• The debt must be alimony, maintenance, or support for spouse/child of the debtor
• The debt must be established by a separation agreement, divorce decree order of a court of record or other determination made by a governmental unit
• The debt must not be assigned to any non-governmental unit

One of the more difficult issues bankruptcy courts have been trying to determine is whether Guardian ad Litem fees are dischargeable in bankruptcy. Debtors have argued that these fees should be discharged because the fees are owed to a guardian or child representative in divorce proceedings and are not specifically enumerated by the statute. 
 
Typical Scenario: Husband and wife file for divorce. The Domestic Relations Court appoints an attorney to represent a child in the divorce case. Court decree is entered, dividing property and debts between the husband and wife. Domestic Relations Court orders that husband is responsible for 70% of the fees owed to the court appointed Guardian ad Litem and the wife is responsible for 30%. Debtor husband files bankruptcy and questions the fees non-dischargeability.

The facts above were addressed by the Bankruptcy Court in the Southern District of Ohio in In re Kassicieh, 467 B.R. 445 (2012). In reviewing the case law, the court determined that the Guardian ad Litem fees, although not specifically addressed in the statute in section 101(14A) as a Domestic Support Obligation, felt that the nature of the debt put it within the scope of a Domestic Support Obligation. In ruling that way, the court made clear to distance itself from the court’s that have interpreted the “plain meaning” of section 101(14A).

Courts with the plain meaning of the statute interpretation have held that, because Guardian ad Litem fees are not included in the list of “payees” in section 101(14A), the debts owed to the Guardian ad Litem are not and cannot be construed as domestic support obligations Levin v. Greco (In re Greco), 397 B.R. 102 (Bankr. N.D. Ill 2008). Those lines of cases argue that ignoring the payee requirement in the statute flies in the face of basic statutory construction and interpretation. In re Greco at 107.

The Court in In re Kassicieh acknowledged the plain meaning courts’ holdings but distinguished its judgment and reasoning stating that courts have interpreted section 101(14A) in the same way for years when it comes to third party payees. Most courts have determined that the nature of the debt rather than the identity of the payee/creditor controls. In re Kassicieh at 450. The court stressed that these fees are in place to protect the child in a domestic relations case, and the fees and services that the Guardian ad Litem provides have the effect of being domestic support obligations. As the Court succinctly put it, “the parents or other parties who created the dispute requiring the appointment of the Guardian ad Litem must bear the cost of that support”. In re Kassicieh at 451. The Bankruptcy Appellate Panel for the Sixth Circuit agreed with the reasoning in the Southern District’s opinion and stated that Guardian ad Litem fees constitute “domestic support obligations”.

This important opinion is the first real decision in the Sixth Circuit to address the issue. Now creditor guardians will know that their fees are non-dischargeable in bankruptcy court. And because these fees have been interpreted as a section 101(14A) domestic support obligation, they will automatically be considered non-dischargeable under section 523(a)(5) and will not require an adversary finding of non-dischargeability.