UNITED STATES SUPREME COURT
UPDATE: CONSUMER BANKRUPTCY
Supreme Court News:
Undisbursed Funds Returned to
Debtor upon Conversion
In a unanimous decision, the Supreme
Court found that funds paid into a
confirmed chapter 13 plan that are
undisbursed when the case is converted
to chapter 7 should be returned to
the debtor. Harris v. Viegelahn, 575
U.S. ___, No. 14-400 (May 18, 2015).
Section 348(f) shields post-petition
assets from chapter 7 creditors by
providing that, upon conversion, the
chapter 7 estate consists of the debtor’s
property as of the original chapter 13
petition date. Permitting the trustee to
distribute funds received post-petition
and after conversion would be contrary
to congressional intent. Also, upon
conversion, the trustee’s services,
including distribution of payments to
creditors, are terminated. The Court
added that it did not “regard as a
‘windfall’ a debtor’s receipt of a fraction
of the wages he earned and would
have kept had he filed under Chapter
7 in the first place.” NACBA filed an
amicus brief in support of the debtor in
this case.
Supreme Court Finds Denial of
Confirmation not Appealable Order
The Supreme Court unanimously
decided that denial of confirmation is
not a final, appealable, order. Bullard v.
Blue Hills Bank, 575 U.S. ___, No. 14116 (U.S. May 4, 2015). In answer to
the debtor’s argument that not treating
denial of confirmation as a final order
debtors are left with unsatisfactory or
unworkable methods of dealing with
confirmation denials, the Court noted
sections 1292(b) and 158(d)(2), which
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CONSUMER BANKRUPTCY JOURNAL
offer avenues for interlocutory appeals,
provide a “safety valve.” NACBA filed
an amicus brief in support of the debtor
in this case.
Oral Arguments:
The Supreme Court, on March 24,
2015, heard oral argument in Bank of
America, N.A. v. Caulkett and Bank
of America, N.A., v. Toledo-Cardona,
concerning the issue of whether
chapter 7 debtors may strip off junior
mortgages where there is no value in
the collateral to support the junior lien.
NACBA filed an amicus brief urging the
Court to affirm the Eleventh Circuit’s
decision that such lien strip off does
not violate Dewsnup v. Timm, 502 U.S.
410 (1992).
On February 25, 2015, the Court heard
arguments in Baker Botts v. ASARCO,
No. 14-103, on the issue of whether
Section 330(a) of the Bankruptcy Code
grants bankruptcy judges discretion to
award compensation for the defense
of a fee application. NACBA filed an
amicus brief urging the Court to reverse
the Fifth Circuit’s decision denying fees.
Cases of Interest:
Child Support Exclusion Not
Redu 6VB'