What Does The Recent "Conversion Leftovers" Decision Mean For Your Chapter 13 Bankruptcy?


If you're currently making regular payments to a trustee in conjunction with a Chapter 13 bankruptcy, you may be looking forward to the projected end date of your Chapter 13 plan. However, if you're instead looking to convert this plan to a Chapter 7 discharge and begin rebuilding your credit more quickly, a recent decision by the U.S. Supreme Court may affect what happens to your case -- and this decision could even mean some extra money in your pocket. Read on to learn more about how "conversion leftovers" will now be handled by all federal bankruptcy courts.

What are "conversion leftovers"?

Whenever you make your required payment to the bankruptcy trustee as part of your Chapter 13 plan, he or she distributes these funds to your debtors in order of priority and type of debt. If, like many Chapter 13 debtors, you decide that a Chapter 7 liquidation is a better option, your case will be converted to a Chapter 7 and any funds remaining in the trustee's possession will be termed "conversion leftovers." 

In the past, the distribution of these conversion leftovers was unclear. Many trustees would send these funds to secured creditors or other entities who might otherwise not receive any compensation in a Chapter 7 discharge. Others could opt to return these conversion leftovers to the debtor. This varying treatment by bankruptcy courts led to litigation at the federal appellate level, and one case eventually made it to the U.S. Supreme Court. 

What did the Supreme Court's decision in Charles E. Harris III v. Mary K. Viegelahn change about bankruptcy law?

This case involved a dispute about the disposition of around $4,000 in mortgage payments made from the debtor to the bankruptcy trustee. After the debtor converted his case to a Chapter 7 bankruptcy, the trustee released these funds to several unsecured creditors that would otherwise have received no compensation in connection with the Chapter 7 bankruptcy.

The Supreme Court held that, in cases that begin as a Chapter 13 and end as a Chapter 7, any excess funds held by the trustee must be returned to the debtor, rather than distributed to creditors without the debtor's express permission. Future (and current) Chapter 7 debtors are entitled to receive any remaining funds without having to make a specific request -- however, you can also appeal to the bankruptcy court if you believe the trustee is still holding your funds. To find out more, speak with someone like Baxley Law Firm LLC.


29 May 2015

Resurrecting Your Business

When I was a child, I regularly visited a local department store. At this lovely business establishment, one could purchase many items including clothing, shoes, and even hotdogs. Sadly, due to competition and other factors, the store closed its doors for the last time several years ago. If the owners of the store had considered bankruptcy options, they might still be meeting customers’ needs today. On this blog, you will learn how to resurrect your business with available bankruptcy alternatives. Regardless of whether you choose to liquidate your assets or reorganize your entity, the opportunity to remain in operation might be an option for you.