United States District Court, M.D. Alabama, Northern Division
In re DAVID DUANE JORDAN. Debtor,
DAVID DUANE JORDAN, Defendant. SERVISFIRST BANK, Plaintiff, Bankruptcy Adversary Proceeding No. 17-3092-WRS4
MEMORANDUM OPINION AND ORDER
KEITH WATKINS UNITED STATES DISTRICT JUDGE
matter, which arises out of a Chapter 7 bankruptcy
proceeding, is an attempt by a creditor to have a federal
court of limited jurisdiction oversee its efforts to collect
an $800, 000 debt at a rate of $600 per month. Because state
courts of general jurisdiction are better suited to handling
such matters, the court will deny Plaintiff's motion to
withdraw the reference (Doc. # 1), related motion for a
continuing order of condemnation (Doc. # 3), and the
parties' joint motion for entry of a continuing order of
condemnation (Doc. # 7).
ServisFirst Bank sought a declaration in bankruptcy court
that the debt owed to it by Defendant David Duane Jordan was
nondischargeable because it was obtained through fraud. The
bankruptcy court entered a stipulated judgment providing that
$800, 000 of the debt was nondischargeable in bankruptcy
under 11 U.S.C. § 523(a)(2)(B), which makes debts
procured through a false writing nondischargeable. (Doc. # 1,
at 8-9.) After entry of judgment, Plaintiff downloaded forms
from the bankruptcy court's website and began wage
garnishment proceedings to collect its $800, 000 debt.
Defendant's wages were to be garnished at a rate of $600
per month. At that rate, the $800, 000 debt would be paid off
in about 111 years.
to secure its garnishment, Plaintiff moved the bankruptcy
court to enter an order of continuing condemnation. The
bankruptcy court denied the motion, but ordered the
bankruptcy clerk to pay out any funds held by the court that
were owed to Plaintiff. The bankruptcy court further advised
that it would abstain from further proceedings initiated by
Plaintiff in its efforts to collect its $800, 000 debt.
then moved to reopen the adversary proceeding and withdraw
the reference. (Doc. # 1.) The bankruptcy court held a
hearing on the motion during which it explained its view that
allowing creditors in bankruptcy to utilize the federal
courts to collect their debts would “soon
overwhelm” the system. (Doc. # 3-1, at 5.) The
bankruptcy court also explained that state courts of general
jurisdiction are the appropriate fora for such efforts.
Finally, the bankruptcy court warned Plaintiff that the
district court had an absolute right to abstain from
exercising jurisdiction in this matter and that it would
write a memorandum explaining why the district court should
motion to withdraw the reference (Doc. # 1), motion for entry
of continuing order of condemnation (Doc. # 3), and the
bankruptcy court's memorandum (Doc. # 2-1) are now before
the district court. After Plaintiff filed these motions, the
garnishee filed limited objections (Docs. # 4, 6),
reiterating the bankruptcy court's abstention
decision. But the garnishee apparently changed its
mind and has consented to Plaintiff's motions, since
Plaintiff, Defendant, and the garnishee have now filed a
joint motion for a continuing order of condemnation.
(Doc. # 7.) Even so, the district court agrees with the
bankruptcy court that abstention is appropriate. This is a
matter that state courts of general jurisdiction should
courts are courts of limited jurisdiction.”
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994). Bankruptcy matters are included in federal
courts' limited jurisdiction. Indeed, the district courts
have original and exclusive jurisdiction over cases
arising under title 11, which contains the Bankruptcy
Code. See 28 U.S.C. § 1334(a).
federal courts are not absolutely obligated to take on
bankruptcy cases. Except in a few circumstances not
applicable here, a district court “in the interest of
justice, or in the interest of comity with State courts or
respect for State law, ” may abstain “from
hearing a particular proceeding arising under title 11 or
arising in or related to a case under title 11.”
Id. § 1334(c)(1). And when a district court
abstains under § 1334(c)(1), that decision “is not
reviewable by appeal.” Id. § 1334(d).
debtors like Defendant file for Chapter 7 bankruptcy to
discharge their debts. See 11 U.S.C. § 727(a).
A successful Chapter 7 bankruptcy discharges the debtor's
debts unless they fall into any of the nineteen categories of
debts enumerated in 11 U.S.C. § 523 as nondischargeable.
See 11 U.S.C. § 727(b).
kind of nondischargeable debt is any money debt obtained
through fraud. See 11 U.S.C. § 523(a)(2). The
bankruptcy court's stipulated judgment in this case
provided that Defendant's debt to Plaintiff was obtained
through a false writing and thus nondischargeable.
(See Doc. # 1, at 8-9; 11 U.S.C. §
bankruptcy court had jurisdiction to enter a judgment
declaring that $800, 000 of Defendant's debt was
nondischargeable in bankruptcy. See 28 U.S.C. §
1334(a). But the bankruptcy court identified a distinction
between a declaration of nondischargeability of a debt and a
money judgment on the amount of underlying indebtedness. A
declaration of nondischargeability is quintessentially a
bankruptcy function, while a money judgment on a debt is a