Who Gets Funds Held By Ch. 13 Trustee When Case Converts to Chapter 7? Supreme Court Looks to Policy, Equity and the Code During Oral Argument
On Wednesday, April 1, 2015, the U.S. Supreme Court heard oral argument in two bankruptcy cases: Harris v. Viegelahn and Bullard v. Blue Hills Bank. The issue for the Court in Harris is whether funds already paid to, but not yet disbursed by, the chapter 13 trustee should revert to the debtor or be distributed to creditors when the debtor converts his case to chapter 7 after confirmation of his chapter 13 plan. Many of the questions that the Justices asked at oral argument focused not on the nuances of statutory language, but rather on the usefulness of trust law principles in analyzing proposed distribution rules, the wisdom of creating a rule of distribution based on little more than happenstance, and the desire to adopt a rule consistent with Congress’s intent to provide debtors with incentives to file for relief under chapter 13.
The above, written by Prof. Anne Lawton, ABI Resident Scholar, appeared in ABI (American Bankruptcy Institute) e-newsletter of 4/7/15. ABI reports that it will also publish an analysis of the the oral argument in Bullard, the companion case to Harris, in 4/9/15 ABI e-newsletter.