488 B.R. 380
Bankr. N.D. Ill.2013Background
- Plaintiffs Williams and Morgan-Williams filed for Chapter 13 relief; Marilyn Marshall is the Chapter 13 Trustee.
- Their confirmed plan required monthly payments of $4,625 by payroll deduction to the Trustee for distribution to creditors.
- In June 2010, debtor income was interrupted causing plan payment faltering; relief from stay motion filed in April 2011 and granted May 9, 2011.
- Trustee moved to dismiss for failure to make plan payments; motion calendared for May–June 2011 hearings; plaintiffs tendered $15,700 in June 2011 and the motion to dismiss was withdrawn.
- Debtors voluntarily dismissed the case on September 26, 2011; Trustee still held funds received prior to dismissal.
- This motion concerns what happens to funds paid to the Trustee but not yet distributed when a Chapter 13 case is dismissed post-confirmation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether post-confirmation funds revest in debtors upon dismissal | Funds should revest in debtors under 349(b)(3). | Funds must be distributed under the confirmed plan or returned per 349(b)(3) to debtors, depending on status. | Post-confirmation funds revest in debtors and must be returned upon dismissal. |
| Whether 1326(a)(2) applies to post-confirmation funds | §1326(a)(2) governs post-confirmation distributions to creditors. | §1326(a)(2) applies only to pre-confirmation payments; post-confirmation funds revest upon dismissal. | §1326(a)(2) is inapplicable to post-confirmation funds; revesting controls. |
| What governs the disposition of funds when a Chapter 13 case is dismissed after confirmation | Trustee should refund post-confirmation funds to debtors to align with Nash/Slaughter line. | Trustee must follow plan/disbursement rules and return funds only as §349(b)(3) dictates. | Dismissal revests property in debtors; funds held by trustee post-confirmation must be returned to debtors. |
Key Cases Cited
- In re Nash, 765 F.2d 1410 (9th Cir. 1985) (pre-confirmation funds disposition; revesting not applicable to post-confirmation funds)
- In re Slaughter, 141 B.R. 661 (Bankr.N.D. Ill. 1992) (post-confirmation funds not to be revested to creditors after dismissal; language later refined)
- In re Parrish, 275 B.R. 424 (Bankr. D.C. 2002) (1326(a)(2) directs payments in accordance with plan; not undone by §349 upon dismissal)
- In re Tran, 309 B.R. 330 (9th Cir. BAP 2004) (Nash still applies; 1326(a)(2) does not govern post-confirmation funds after dismissal)
- In re Michael, 436 B.R. 323 (Bankr.M.D. Pa. 2010) (1326(a)(2) in context of conversion; does not address post-confirmation disposition after dismissal)
- In re Darden, 474 B.R. 1 (Bankr. D. Mass. 2012) (discussion of post-dismissal funds and plan applicability)