New 11th Cir Decision on Chapter 13 and Sovereign Immunity: State of FL Dept. of Revenue v Diaz

This past Wednesday the 11th Circuit Court of Appeals entered an important decision on sovereign immunity, In re Diaz, Florida Department of Revenue v Diaz, 2011 US App Lexis 15462 (11th Cir 2011). This is an important case for practitioners to review, but I am not going to review the sovereign immunity analyses of the case.

I do want to comment on how this affects chapter 13. Sometimes I just do not understand the 11th circuit decisions when they consider chapter 13 cases. In what appears to me to be directly contrary to the United States Supreme Court decision in US Student Aid Funds v Espinosa, the court held that a creditor with a non-dischargeable claim for child support as well as taxes is not bound by the claim allowed in the bankruptcy court. Even though the creditor was fully paid in the plan based on the allowed claim, the creditor could still claim moneys it is owed such as interest because the underlying debt could not be discharged.

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