Supreme Court hears arguments in bankruptcy cases News
Supreme Court hears arguments in bankruptcy cases

[JURIST] The US Supreme Court [official website] heard oral arguments Wednesday in two bankruptcy cases. In Harris v. Viegelahn [transcript, PDF] the court must decide “whether, when a debtor in good faith converts a bankruptcy case to Chapter 7 after confirmation of a Chapter 13 plan, undistributed funds held by the former Chapter 13 trustee are refunded to the debtor or distributed to creditors.” The dispute involves [SCOTUSblog report] the conversion of the two main forms of bankruptcy relief. Petitioner Charles Harris, after filing a voluntary petition for Chapter 13 bankruptcy and continuing to pay under that plan for about a year, exercised his right to convert his case to Chapter 7 [materials]. While the conversion terminated the service of the Chapter 13 trustee, the former Chapter 13 trustee still held more than $4,300 of Harris’ wages that had been reserved for his mortgage lender and distributed those funds to his other creditors. In response, Harris moved to compel the refund of this money. While the motion was granted by the bankruptcy court and affirmed by the district court, it was ultimately reversed by the US Court of Appeals for the Fifth Circuit [official website], which held that the former trustee was authorized to distribute the post-petition wages despite the conversion.

In Bullard v. Blue Hills Bank [transcript, PDF], the court must consider whether an order denying confirmation of a debtor’s Chapter 13 plan is final within the meaning of 28 USC §158 and is therefore immediately appealable by the debtor. In this case, petitioner Louis Bullard filed [Cornell LII backgrounder] for Chapter 13 bankruptcy after the value of a property he financed through a mortgage with Blue Hills Bank fell lower than the mortgage he owed. Bullard submitted an amended hybrid plan to the bankruptcy court in 2012, citing the drop in property value below the worth of the mortgage. The court denied confirmation of the plan, stating that it was improper under applicable statutes and ordering him to file a new amended plan. Bullard appealed the denial to the Bankruptcy Court for the First Circuit, which denied the appeal and confirmed the judgement of the lower court. An appeal was then taken to the US Court of Appeals for the First Circuit [official website]. The court dismissed the appeal, holding that it did not have jurisdiction over the case because the denial of the proposed plan was not final. The issue of whether such a denial should be considered final is a matter of contention throughout the circuit courts, though the decision made by the First Circuit Court represents the majority approach.