USSC weighs in on what a Trustee can do with funds when case is converted to 7

[despritfreya]

The highest court of the land tells Chapter 13 Trustee. . . unless there is bad faith, upon the filing of a Notice of Conversion to a Chapter 7 give any $$ you are holding back to the debtor even if Plan is confirmed. Mr. Chapter 13 Trustee you are out of a job the minute the debtor converts.

http://www.supremecourt.gov/opinions/14pdf/14-400_f2ah.pdf

Des.

[justbroke]

despritfreya this is what most of Florida did anyhow. In my case, as soon as I converted, the Trustee noted what they had on hand and as part of the order converting the case, the amount on hand was listed and was to be returned to me. (It took 2 months to get my wage order stopped, so I had over $13,000 returned to me by the end of the day.)

What's interesting is whether the new Chapter 13 "Model Plan" in most of Florida will affect this. The Model Plan has this language; "the creditor shall have an administrative lien on such payment(s), subject to objection." I wonder if that language would be considered void given the SCOTUS decision.

A unanimous decision at that. What a slap to the 5th Circuit in that there is NO QUESTION about this according to SCOTUS.

A sobering message...

See Porter, The Pretend Solution: An Empirical Study of Bankruptcy Outcomes, 90 Texas L. Rev. 103, 107–111 (2011) (only one in three cases filed under Chapter 13 ends in discharge)