Monday, July 7, 2014

5th Circuit - Published - Funds held by Chapter 13 Trustee in a Confirmed Plan, are required to be paid to the creditors per the plan

The 5th Circuit held that a Debtor who converted after the plan was confirmed, is NOT entitled to the funds held by the Chapter 13 Trustee.  Rather, the funds belong to the creditors in the confirmed plan.

The 5th Circuit analyzed the situation and determined that the plan was still effective and the Chapter 13 Trustee held the funds in Trust for the creditors.

** Under 9th Circuit approach, funds are not part of the Chapter 7 Estate, but the 9th Circuit never addressed the issue if the Chapter 13 Trustee should distribute funds to the creditors.

(In re Nash, 765 F.2d 1410 (9th Cir. 1985) (holding that any undistributed earnings paid to a Chapter 13 trustee pursuant to a confirmed plan must be returned to the debtor upon dismissal of the Chapter 13 case).

In re Harris

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