The United States Supreme Court has issued a decision favoring debtors who convert Chapter 13 bankruptcy proceedings into Chapter 7 actions, holding that funds collected by a bankruptcy trustee pursuant to a debtor’s Chapter 13 plan belong to the debtor at the moment the debtor converts a case to a Chapter 7 proceeding.
The debtor, Charles Harris, filed for bankruptcy in 2010, seeking protection under Chapter 13 of the Bankruptcy Code. The bankruptcy plan established for Harris enabled him to keep his home and catch up on tardy mortgage payments over time. The “bargain” of a Chapter 13 plan, according to Scotusblog.com, is that a debtor gets to keep one’s assets, but current and future earnings must be used to pay creditors. Chapter 13 repayment plans typically last from three to five years.