In many cases, the family court will not hear the appeal until the bankruptcy case is finished. Some judges will issue a ruling lifting the automatic stay sua sponte, allowing the family court to hear the appeal . Other judges will require the moving party to file a Motion for Relief from Stay as to the distributive award to obtain stay relief. In simpler terms, stay relief means that the Bankruptcy Court issues an order that permits the moving spouse to continue her family court appeal requesting (presumably) an increase in support. A Bankruptcy Court will typically grant these types of motions.
I realize this is not a complete or definitive answer, so I will conduct further research to see if I can find relevant New York cases on point and get back to you.
In re Taub appears to be extremely instructive as to how a New York Bankruptcy Court would likely analyze the issues in your case. Please see the link here:
Please let me know if you have any further questions in light of the above case.
"Who has the right to appeal the state court decision. My wife has the right to appeal to State Court decision or the trustee? Because my wife is a debtor and the trustee is handeling all of debits. We are not talking about stay! Who has the right?"
Actually, after doing some further research, I believe YOU might be the only one who could appeal at this point (although you would have to file a Motion to Lift the Automatic Stay first). Theoretically, the Trustee could also appeal, but only "for cause" (i.e. if you weren't making the current payments ordered by the state court to the Trustee). As long as you're making your scheduled payments to the Trustee, I don't think the Trustee has sufficient cause to do anything here. Your wife will likely need to wait until she receives her bankruptcy discharge to go back to state court and try to have the distributive award increased.
Who has the right to appeal the state court decision?
The very narrow answer to your question is that no one has a direct right to appeal the state court decision during the bankruptcy (neither your wife nor the Trustee). New York law clearly states that equitable distribution awards are property of the bankruptcy estate (which is why you've been paying the Trustee during the bankruptcy). Thus, in order to proceed on an appeal of an equitable distribution award, the debtor must 1) receive a discharge, 2) the case must be dismissed, or 3) the bankruptcy court must enter an order explicitly allowing commencement of the state court appeal. Without one of these three things occurring, no one has the right to appeal.
In In re Frederes, the Trustee (with the support of the Debtor) filed an adversary proceeding to claim an interest in real property owned solely by the non-Debtor spouse. There, the court held that under New York law, the Debtor had no vested legal or equitable property interest in the real property at the time of the filing of his petition, the property was not property of the estate within the meaning of 11 U.S.C. §541(a)(1), and thus was not subject to turnover pursuant to 11 U.S.C. §542.
There's also In re Cole, where the bankruptcy court held that the non-Debtor spouse could continue the divorce action and litigate her claim to equitable distribution from the Debtor. Significantly, this Debtor spouse was not paying his current support obligations, yet the court still apparently thought this was a pretty close call as to whether to send the case back to state court. Moreover, the equitable distribution award in that case had not been finalized.
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