548 B.R. 818
Bankr. D.N.M.2016Background
- Debtor Ely Yao filed Chapter 13 in 2010 and obtained confirmation of a 58-month plan in April 2011; he made 54 plan payments and four remained when he converted to Chapter 7 in June 2015.
- Conversion to Chapter 7 terminated the Chapter 13 Trustee’s services; a Chapter 7 trustee was appointed and filed a no-distribution report. Debtor did not receive a Chapter 7 discharge.
- Two months after conversion, Debtor moved to reconvert the case to Chapter 13 and to reinstate (complete) the previously confirmed plan, offering to immediately pay the remaining $5,200 into the court registry.
- The Chapter 13 Trustee objected, arguing that a confirmed Chapter 13 plan is nullified by conversion to Chapter 7 and thus cannot be reinstated; Trustee otherwise did not contest Debtor’s ability to perform the confirmed plan.
- The court heard argument, found no evidence of bad faith by Debtor, and emphasized the narrow facts: only four plan payments remained, the motion to reconvert was filed quickly, and funds were available to complete the plan.
Issues
| Issue | Debtor's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether a confirmed Chapter 13 plan survives reconversion after a voluntary conversion to Chapter 7 | Debtor: confirmed plan remains in existence and can be reinstated upon reconversion; he will pay remaining installments | Trustee: confirmation is nullified by conversion to Chapter 7; reconversion cannot simply resume the old confirmed plan | Court: confirmed plan is not nullified; upon reconversion Chapter 13 (and §1327) again applies and the existing confirmed plan can bind parties and be completed (narrowly applied here) |
| Whether conversion to Chapter 7 automatically voids the confirmation order | Debtor: conversion does not void or vacate the confirmation order | Trustee: confirmation order is null and void after conversion | Court: conversion suspends the operation of Chapter 13 (so §1327 no longer binds), but it does not nullify or vacate the confirmation order; the order remains and can become effective again upon reconversion |
| Whether reconversion should be denied for lack of good faith or feasibility under Marrama and §1307(c) | Debtor: acted in good faith, filed reconversion promptly, has funds to finish plan | Trustee: (argues generally) reconversion should be scrutinized for bad faith; here objects to reinstatement of plan | Court: no bad faith shown; Marrama standards do not bar reconversion in these facts; reconversion permitted |
| Whether §706(a) bars reconversion after a prior voluntary conversion (absolute right lost) | Debtor: reconversion permissible here | Trustee: implied argument that reconversion cannot revive prior plan | Court: declined to decide broadly whether §706(a) forbids reconversion after prior conversion; decision limited to the unique, narrow facts of this case |
Key Cases Cited
- Harris v. Viegelahn, 135 S. Ct. 1829 (2015) (Chapter 13 provisions cease to apply after conversion to Chapter 7)
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (bad-faith conduct can bar a debtor’s right to convert under §706(a))
- In re Green, 169 B.R. 480 (Bankr. S.D. Ga. 1994) (held conversion nullified prior confirmation; court disagreed with that rule)
- In re Doyle, 11 B.R. 110 (Bankr. E.D. Pa. 1981) (noting Chapter 13 plan and confirmation order are no longer in force after conversion; used by other courts to support nullification)
- In re Povah, 455 B.R. 328 (Bankr. D. Mass. 2011) (recognizes discretionary reconversion may be permitted under appropriate circumstances)