Justices to Pick Over Bankruptcy Leftovers

WASHINGTON (CN) - The Supreme Court agreed Monday to answer a bankruptcy question that has apparently divided courts for 30 years.

At issue is what a Chapter 13 trustee must do if a debtor converts his case to Chapter 7 while funds meant to be distributed to creditors still remain.

When Charles Harris converted his case to Chapter 7, a federal judge in Texas found that he was entitled to retrieve funds that the Chapter 13 trustee that had not yet distributed to Harris' creditors at the time of conversion.

The 5th Circuit disagreed, however, and the Supreme Court took up the case on Friday, without comment as is its custom.

In its July 2014 reversal, the 5th Circuit had noted that Harris' debt stemmed from his home-mortgage loan held by Chase.

Mary Viegelahn, the trustee in his Chapter 13 case, had more than $5,500 of Harris' payments at the time of the case's conversion in late 2011.

Harris wanted $4,300 returned to him, since $1,200 of the leftover funds went to his counsel.

Viegelahn had given the bulk of the other funds to six unsecured creditors. She took $267.79 as commission and distributed $397.68 to an unsecured creditor that Harris owed $900 for a television.

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.

Email *

Submit