In Re: Devan Dennis and Tyeane Halbert, Debtors-Appellees, Appeals of: Illinois Department of Human Services and James T. Dimas,
April 15, 2019
Appeals from the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division-BK. Nos.
18-02067 & 16-ap-00479 - A. Benjamin Goldgar and Deborah
Lee Thorne, Bankruptcy Judges.
Wood, Chief Judge, and Bauer and St. Eve, Circuit Judges.
Dennis and Tyeane Halbert (collectively, Debtors) each owed
debts to the Illinois Department of Human Services (DHS).
Dennis owed for overpayments made to her under the Illinois
Child Care Assistance Program; Halbert owed for overpayments
made to her under the Supplemental Nutrition Assistance
Program. The Debtors each filed for bankruptcy. DHS now
appeals from orders entered by the bankruptcy court in each
case holding that the overpayment debts were not domestic
support obligations. For the reasons that follow, we affirm
the orders of the bankruptcy court.
applied for and received benefits under the Illinois Child
Care Assistance Program to help pay her daughter's
daycare tuition. In April 2009, DHS determined it had
overpaid benefits to her daycare provider because Dennis
failed to provide accurate information on her application
about her employment. The total amount of the overpayment was
2018, Dennis filed a Chapter 13 bankruptcy petition. DHS
filed a proof of claim, arguing that the $7, 962.25
overpayment debt was a priority domestic support obligation
under § 507(a)(1)(B). Dennis objected, arguing the
overpayment was a general unsecured dischargeable debt. The
bankruptcy court agreed with Dennis, holding that her
overpayment debt to DHS was not a domestic support
applied for and received Supplemental Nutrition Assistance
Program benefits from DHS for herself and her two minor
children. From October to December 2009, Halbert received
payments totaling $1, 008. From August 2010 through January
2011, she received payments totaling $2, 386. DHS then
determined that she had failed to disclose income which
resulted in a $3, 394 overpayment of benefits. Halbert paid
$1, 473 and in 2015 DHS intercepted the remaining balance of
$1, 921 from her income tax refund.
filed a Chapter 7 bankruptcy petition in 2016, and claimed
the intercepted funds as an exempt asset. On July 21, 2016,
she filed an adversary complaint to recover the intercepted
payment as an "avoidable preference" under 11
U.S.C. § 547(b). DHS argued that avoidance was barred by
11 U.S.C. § 547(c)(7) because the overpayment was a
"domestic support obligation." Upon cross motions
for summary judgment, the bankruptcy court ruled in favor of
Halbert, holding that "such a debt is simply a debt owed
for the return of benefits that should never have been paid
at all. The payment made on the debt, therefore, is avoidable
by the Debtor as a preference." Halbert v. Dimas (In
re Halbert), 576 B.R. 586, 589 (Bankr. N.D. 111. 2017).
review a bankruptcy court's legal conclusions de
novo. In re Doctors Hosp. of Hyde Park, Inc., 474 F.3d
421, 426 (7th Cir. 2007). In each case in this consolidated
appeal, the bankruptcy court concluded that a debt owed to
the government for the overpayment of benefits is not in the
nature of a domestic support obligation. The courts
characterized the overpayment as "a debt for the return
of a benefit paid to the debtor that should not have been
paid in ...