Consumer Bankruptcy Journal Summer 2015 - Page 16

UNITED STATES SUPREME COURT UPDATE: CONSUMER BANKRUPTCY Supreme Court News: Undisbursed Funds Returned to Debtor upon Conversion In a unanimous decision, the Supreme Court found that funds paid into a confirmed chapter 13 plan that are undisbursed when the case is converted to chapter 7 should be returned to the debtor. Harris v. Viegelahn, 575 U.S. ___, No. 14-400 (May 18, 2015). Section 348(f) shields post-petition assets from chapter 7 creditors by providing that, upon conversion, the chapter 7 estate consists of the debtor’s property as of the original chapter 13 petition date. Permitting the trustee to distribute funds received post-petition and after conversion would be contrary to congressional intent. Also, upon conversion, the trustee’s services, including distribution of payments to creditors, are terminated. The Court added that it did not “regard as a ‘windfall’ a debtor’s receipt of a fraction of the wages he earned and would have kept had he filed under Chapter 7 in the first place.” NACBA filed an amicus brief in support of the debtor in this case. Supreme Court Finds Denial of Confirmation not Appealable Order The Supreme Court unanimously decided that denial of confirmation is not a final, appealable, order. Bullard v. Blue Hills Bank, 575 U.S. ___, No. 14116 (U.S. May 4, 2015). In answer to the debtor’s argument that not treating denial of confirmation as a final order debtors are left with unsatisfactory or unworkable methods of dealing with confirmation denials, the Court noted sections 1292(b) and 158(d)(2), which 16 CONSUMER BANKRUPTCY JOURNAL offer avenues for interlocutory appeals, provide a “safety valve.” NACBA filed an amicus brief in support of the debtor in this case. Oral Arguments: The Supreme Court, on March 24, 2015, heard oral argument in  Bank of America, N.A. v. Caulkett and  Bank of America, N.A., v. Toledo-Cardona, concerning the issue of whether chapter 7 debtors may strip off junior mortgages where there is no value in the collateral to support the junior lien. NACBA filed an amicus brief urging the Court to affirm the Eleventh Circuit’s decision that such lien strip off does not violate Dewsnup v. Timm, 502 U.S. 410 (1992). On February 25, 2015, the Court heard arguments in Baker Botts v. ASARCO, No. 14-103, on the issue of whether Section 330(a) of the Bankruptcy Code grants bankruptcy judges discretion to award compensation for the defense of a fee application. NACBA filed an amicus brief urging the Court to reverse the Fifth Circuit’s decision denying fees. Cases of Interest: Child Support Exclusion Not Redu 6VB'