- United States Bankruptcy Appellate Panel for the First Circuit, BAP No. EP 15-043, April 14, 2016
- Reversing and remanding, the First Circuit BAP concluded that Harris v. Viegelahn, 135 S.Ct. 1829 (2015), which held that plan payments made by a chapter 13 debtor from his post-petition wages and held by a chapter 13 trustee at the time a case is converted to chapter 7 must be returned to the debtor rather than distributed to creditors, was not applicable to a case that is simply dismissed prior to confirmation of a plan.The Court reasoned that with such a dismissal (i) sec. 348 is not implicated, as it was in Harris, (ii) sec. 349 governs, (iii) a trustee's services are not terminated, and (iv) a trustee still has authority to disburse funds pursuant to sec. 1326(a)(2), which specifically contemplates payment by the trustee of allowed administrative expenses such as attorney's fees. The Court noted that some other courts have distinguished between pre and post-confirmation dismissals in applying Harris, but in light of the facts here, that issue would not be addressed.
- Procedural context:
- This was an appeal from an order of the bankruptcy court vacating a prior order on a motion for a review of counsel fees awarded in a dismissed chapter 13 case.
- A chapter 13 case was dismissed prior to confirmation of any plan. Debtor's counsel was awarded attorney's fees and the order included a provision requiring payment of the fees from the Debtor's payments then held by the chapter 13 trustee. The trustee paid the fees due under one order but inadvertently failed to pay the fees due under a second order, instead turning all remaining money in the account over to the Debtor. Those funds could not be recovered and the trustee was ordered to pay an agreed $3,000 to counsel. While the $3,000 was paid, the Court later vacated that order based on the recent Supreme Court case of Harris v. Viegelahn. This order left it unclear whether counsel had to return the $3,000 to the trustee, and counsel appealed.
- Boroff, Godoy, and Finkle
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