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In re Zachary Allen ; Tiara Donegan

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Gallagher v. Dockery (In re Gallagher)

Gallagher v. Dockery (In re Gallagher), Case No. CC-13-1368-TaKuPa (9th Cir. B.A.P., March 17, 2014) (unpublished)
The Ninth Circuit Bankruptcy Appellate Panel reversed the order of the bankruptcy court granting the Chapter 13 trustee's request for return of refunded plan payments made to debtors after debtors' case was converted to Chapter 7.
Procedural context:
Appeal from the bankruptcy court for the Central District of California ordering turnover of plan payments under 11 U.S.C. 542 and providing law firm with immediate collection rights; reviewed de novo.
Debtors retained law firm to represent them in Chapter 13 case. Law firm later advised the bankruptcy court that it was no longer representing debtors and that debtors had failed to make a plan payment; bankruptcy court subsequently converted the case to Chapter 7. The bankruptcy court entered a fee order for supplemental attorney's fees two weeks after converting the case to Chapter 7. After the case was converted, the Chapter 13 trustee filed and served a Notice of Intent disclosing that the law firm did not hold an allowed claim and refunding approximately $8,000 to the debtors. No objections were filed to the trustee's Notice of Intent. After the Chapter 13 trustee realized that the firm had obtained a supplemental fee award, she contacted the Chapter 7 trustee and stipulated to reconvert the case to Chapter 13 in order to require turnover of the refund and payment to the firm. The bankruptcy court reconverted the case to Chapter 13, and the Chapter 13 trustee filed a turnover motion based on 11 U.S.C. 105(a). The bankruptcy court granted the Chapter 13 trustee's request, basing its turnover order on 11 U.S.C. 542. The debtors timely appealed.
Taylor, Pappas, and Kurtz

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