If a trustee recovers an estate asset after the debtors made their last payment under a chapter 13 plan, the recovery goes to the debtor in the absence of a provision in the plan directing the asset to creditors.
That’s the holding in a January 26 opinion by Chief Bankruptcy Judge Noah G. Hillen of Boise, Idaho.
A couple confirmed a chapter 13 plan. After making the last payment in their five-year plan, the chapter 13 trustee filed a notice of completion of payments, and the debtors received their discharge.
Six weeks after discharge, the trustee received a check for almost $5,000 from a creditor representing an overpayment that the debtors evidently had made years before filing. The $5,000 represented payment on a claim belonging to the debtors’ estate.
The trustee and the debtors submitted an order to Judge Hillen authorizing the trustee to distribute the $5,000 to creditors. Judge Hillen balked, saying that he “had concerns with this approach” and asked “how [the $5,000] may be paid to creditors at this late date?”
If the payment were seen as a plan modification, Section 1329(c) would apply. “At any time after confirmation of the plan but before the completion of payments under such plan,” the subsection provides that “the plan may be modified.” However, the trustee was not seeking to modify the plan, and Judge Hillen said that the parties had not agreed to a modification.
On the other hand, Judge Hillen said that “a modification may not be required” if the $5,000 was considered a recovered asset. So, he looked at the plan.
The plan did provide that unsecured creditors would be paid pro rata after disbursements were made to other creditors under the plan, but another provision in the plan vested estate property in the debtors on confirmation.
The trustee cited cases where recoveries after discharge went to creditors, but Judge Hillen distinguished the decisions, saying that the plans called on the trustees to distribute recoveries to creditors. Instead, Judge Hillen followed a 2017 decision from New Jersey where the court refused to give creditors a recovery that arrived after the plan was over.
Judge Hillen said that the “Court cannot locate any authority in the Bankruptcy Code or the confirmed plan to permit Trustee to distribute the [$5,000] to Debtors’ creditors” when plan payments had been made, the discharge had been entered and there was “no plan provision permitting Trustee to recover and administer post-confirmation assets.”
Citing Law v. Siegel, 571 U.S. 415, 421 (2014), Judge Hillen decided that he could not use the court’s equitable powers under Section 105(a) to authorize the payment to creditors. Left with no alternative, he directed the trustee to remit the $5,000 to the debtors.
If a trustee recovers an estate asset after the debtor made their last payment under a chapter 13 plan, the recovery goes to the debtor in the absence of a provision in the plan directing the asset to creditors.
That’s the holding in a January 26 opinion by Chief Bankruptcy Judge Noah G. Hillen of Boise, Idaho.
A couple confirmed a chapter 13 plan. After making the last payment in their five-year plan, the chapter 13 trustee filed a notice of completion of payments, and the debtors received their discharge.
Six weeks after discharge, the trustee received a check for almost $5,000 from a creditor representing an overpayment that the debtors evidently had made years before filing. The $5,000 represented payment on a claim belonging to the debtors’ estate.
The trustee and the debtors submitted an order to Judge Hillen authorizing the trustee to distribute the $5,000 to creditors. Judge Hillen balked, saying that he “had concerns with this approach” and asked “how [the $5,000] may be paid to creditors at this late date?”