Supreme Court rules in bankruptcy case

Supreme Court rules in bankruptcy case

The US Supreme Court [official website] ruled [opinion, PDF] unanimously Monday in Harris v. Viegelahn [SCOTUSblog materials] that a debtor who converts to Chapter 7 is entitled to return of any postpetition wages not yet distributed by the Chapter 13 trustee. 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 an opinion by Justice Ruth Bader Ginsburg, the Supreme Court reversed that decision.

The court added the case to its docket [JURIST report] in December. Oral arguments [JURIST report] were heard last month.