Williams v. Marshall
526 B.R. 695
N.D. Ill.2014Background
- Ronald Williams and Dana Williams filed for Chapter 13 on Nov. 20, 2008; Marilyn Marshall was the Chapter 13 trustee.
- Plan confirmed Feb. 3, 2009 requiring $4,625 monthly to the Trustee for 60 months by payroll deductions.
- Debtors voluntarily dismissed on Sept. 26, 2011; $155,879.58 paid to Trustee; $136,770.12 disbursed to creditors; ~$16,868.24 remained undistributed at dismissal.
- Adversary proceeding started Nov. 15, 2011 to recover undistributed funds; 2013 bankruptcy court judgment for Williamses; Trustee appealed.
- Court addresses whether undistributed post-confirmation funds held by the Trustee post-dismissal revest in the debtors under 11 U.S.C. § 349(b)(3) or must be distributed under § 1326.]
- Court’s analysis centers on whether § 1326(a)(2) controls post-confirmation, post-dismissal funds, or whether § 349(b)(3) revests such funds to the debtors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1326(a)(2) governs post-dismissal funds held by a trustee. | Williamses: funds not distributed revest to them under § 349(b)(3). | Trustee: funds must be distributed to creditors under § 1326(a)(2). | § 1326(a)(2) does not apply after dismissal; revestment follows § 349(b)(3). |
| Whether § 349(b)(3) revests undistributed funds to the debtors when a Chapter 13 case is dismissed. | Funds are property of the estate revesting to the debtors. | Revestment occurs only to the extent § 349(b)(3) applies; plan terms and § 1326 govern prior to dismissal. | Undistributed funds held by the Trustee at dismissal are revested to the debtors under § 349(b)(3). |
| What effect do post-confirmation earnings/payments have on the estate and revestment under § 349(b)(3)? | Post-confirmation payments remain part of the estate and revest to debtors. | Post-confirmation payments are not controlled by § 1326 after dismissal; revestment principle governs. | Post-confirmation funds within the estate revest to the debtor under § 349(b)(3). |
Key Cases Cited
- In re Michael, 699 F.3d 305 (3d Cir.2012) (post-confirmation funds vest in debtor and debtor retains interest until trustee distributes)
- In re Slaughter, 141 B.R. 661 (Bankr.N.D.Ill.1992) (trustee controls funds as estate assets; distributions topic separate from revestment)
- In re Nash, 765 F.2d 1410 (9th Cir.1985) (section 1326(c) limitations; who disburses funds)
- Parrish, 275 B.R. 424 (Bankr.D.D.C.2002) (§349(b)(3) revestment challenged; result depends on §1326 applicability)
- Darden, 474 B.R. 1 (Bankr.D.Mass.2012) (post-dismissal distributions may be warranted under §349 for creditor interests)