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High court hears argument in a pair of bankruptcy cases; decisions expected this summer

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “What is Chapter 13 bankruptcy?”

 

The United States Supreme Court recently heard oral arguments in two bankruptcy cases. While the decisions in the cases—expected later this summer—are not expected to be earth-shaking, the results may affect the manner in which debtors proceed in converting existing Chapter 13 bankruptcies into Chapter 7 actions and in considering the issue of appellate rights when submitting a Chapter 13 reorganization plan.

Supreme Court Mecklenburg Bankruptcy Lawyer Charlotte Debt AttorneyThe first case—Harris v. Viegelahn—involves a debtor who initially filed for bankruptcy under Chapter 13 of the Bankruptcy Code. Under Chapter 13, a debtor can hold onto assets such as one’s house and property. With the assistance of a bankruptcy trustee, the debtor can establish a payment plan with creditors. The trustee collects the debtor’s assets and funds out of the debtor’s monthly paychecks and distributes payments to creditors.

Oftentimes debtors are unable to keep up with the Chapter 13 payment plan and convert the bankruptcy into a Chapter 7 proceeding. Under Chapter 7, a debtor relinquishes assets (with the exception of exempt property, which is designated under the law of whichever state in which the debtor resides) for liquidation—or sale. The trustee uses the proceeds of the sale of assets to pay creditors.

In Harris, after the debtor converted his bankruptcy into a Chapter 7 action, the trustee in the Chapter 13 action collected over $4,000 to pay to the debtor’s mortgage lender and other creditors. The trustee distributed the money to the creditors.

Harris objected, filing an action seeking return of the funds. The debtor and trustee have conflicting arguments, based on the Bankruptcy Code, about what happens to monies the debtor earned after the transfer of a case from Chapter 13 to Chapter 7, and lower federal courts have made conflicting rulings on the issue.

While the issue is narrow, observes Ronald Mann at ScotusBlog.com, it comes up frequently in bankruptcy conversions and could affect the planning and timing of conversions.

The second case—Bullard v. Blue Hills Bank—involves a debtor who submitted a series of reorganization plans to a bankruptcy court in a Chapter 13 action. The court rejected three plans and ordered Bullard to submit another amended plan, or else face dismissal of his bankruptcy.

Bullard appealed the rejection of his amended reorganization plan to two different appellate courts. They held that they had no jurisdiction to hear the appeal, because the bankruptcy court had ordered Bullard to submit an amended plan, meaning its rejection was not “final” within the meaning of the applicable statute. Only a “final” order can be appealed, the courts ruled.

The Supreme Court will decide whether the denial of a Chapter 13 reorganization plan is “final” such that it may be immediately appealed, as the debtor advocates, or whether—as Blue Hills Bank argues—only “final actions” such as the termination of a bankruptcy action are appealable.

If you find yourself needing the services of an experienced Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.

 

 

About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.

 

 

Sources:

http://jurist.org/paperchase/2015/04/supreme-court-hears-arguments-in-bankruptcy-cases.php

http://www.scotusblog.com/2015/03/argument-preview-court-to-take-on-undistributed-funds-and-bankruptcy-conversion/

https://www.law.cornell.edu/supct/cert/14-116

 

 

Image Credit:

“US Supreme Court Building” by Duncan Lock, Dflock – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:US_Supreme_Court_Building.jpg#/media/File:US_Supreme_Court_Building.jpg

 

 

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http://www.youtube.com/user/ArnoldSmithPLLC?feature=watch

 

 

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