(U.S. Sup. Ct. May 18, 2015)
The Supreme Court holds that post-petition debtor wages held by the Chapter 13 trustee after the debtor converts to Chapter 7 should be returned to the debtor rather than distributed to creditors in accordance with the Chapter 13 plan. There was a split on this issue between the Fifth and Third Circuits, with the Fifth Circuit holding the funds were properly distributed to creditors under the plan following conversion. So long as the debtor does not convert to Chapter 7 in bad faith, such funds should be returned to the debtor. Opinion below.
Author: Matt Lindblom