495 B.R. 74
Bankr. E.D. Pa.2013Background
- Debtor Ebony Clements filed a chapter 13 petition July 12, 2012, represented by Basso & Chambers, LLC.
- An amended chapter 13 plan was filed November 26, 2012, with specific payment amounts over five years.
- The plan was never confirmed; an Application for Compensation by Basso & Chambers was filed November 26, 2012.
- Conversion from chapter 13 to chapter 7 occurred February 5–8, 2013, via a court order treating the conversion as a notice of conversion.
- Chapter 13 trustee held undistributed funds ($1,750) that had been paid pre-conversion; no assets were available for the chapter 7 estate after conversion; the dispute centered on whether to deduct administrative expenses before returning funds to the debtor.
- The core issue is whether § 348(f)(1) or § 1326(a)(2) governs the disposition of undistributed plan payments upon pre-confirmation conversion to chapter 7, and whether § 1326(a)(2)’s third sentence applies in a case with no order denying confirmation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §348(f)(1) control undistributed plan payments after conversion from chapter 13 to chapter 7? | B&C argues §1326(a)(2) permits deducting admin expenses before returning funds. | Debtor argues §348(f)(1) controls, returning undistributed funds to the Debtor. | §348(f)(1) controls; undistributed plan payments return to the Debtor. |
| Does the third sentence of §1326(a)(2) apply where no order denying confirmation was entered before conversion? | B&C contends the third sentence applies to deduct admin expenses before return. | Clements contends the third sentence applies only if confirmation was denied. | Third sentence does not apply; no denial of confirmation occurred. |
| What is the proper scope of the third sentence of §1326(a)(2) in the conversion context? | Footnotes in Michael suggest admin expenses may be deducted pre-conversion; broader interpretation possible. | Interpretation should be narrow to denial of confirmation; not triggered by conversion. | Interpretation is narrow; third sentence does not trigger upon conversion without denial of confirmation. |
Key Cases Cited
- In re Michael, 699 F.3d 305 (3d Cir. 2012) (holds undistributed chapter 13 payments post-conversion generally return to debtor)
- Bullock, 41 B.R. 637 (Bankr.E.D. Pa. 1984) (early treatment of 13 plan payments after conversion (pre-348))
- In re Lewis, 346 B.R. 89 (Bankr.E.D. Pa. 2006) (preconfirmation context and dismissal/denial interplay with 1326(a)(2))
- In re Hampton, 383 B.R. 560 (Bankr.S.D. Ga. 2008) (preconversion/denial context and 1326(a)(2) application)