Although the Supreme Court’s decision last year in Harris v. Viegelahn dealt with a chapter 13 case converted to chapter 7 after confirmation of a plan, the principle nonetheless applies before confirmation to prevent a debtor’s lawyer from collecting fees from post-petition income, according to Chief Bankruptcy Judge Michael E. Romero of Denver.
Judge Romero disagreed with a bankruptcy judge in Baltimore and sided with a majority of courts interpreting Justice Ginsburg’s unanimous opinion in Harris to mean that a debtor is entitled to the return of undistributed post-petition income regardless of whether conversion to chapter 7 occurred before or after confirmation.
The case involved a chapter 13 trustee holding less than $700 in post-petition wages earned before the debtor voluntarily sought conversion to chapter 7 before confirmation. The debtor’s counsel sought payment of an administrative expense claim, relying in part on Section 1326(a)(2).
The last sentence in that subsection requires the trustee, if the plan is not confirmed, to return undistributed money to the debtor “after deducting any unpaid” allowed administrative claims.
Holding that the subsection was not properly invoked, Judge Romero cited a statement in Harris teaching that distributions to creditors after conversion are not authorized wind-up tasks. He also relied on the broad assertions in Harris that no provision in chapter 13 holds sway following conversion to chapter 7.
Although Judge Romero faithfully applied Harris, one wonders whether the Supreme Court spoke too broadly and ignored Section 1326(a)(2), which could be read as applicable following conversion. Conceivably, though, the broad statements in Harris are correct if the last sentence in the subsection only applies if confirmation is denied and the chapter 13 case is to be dismissed, not converted.