§ 148.3     Effects of Conversion from Chapter 7 to Chapter 13
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 148.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Section 348 specifies many of the same effects for conversion from Chapter 7 to Chapter 13 as for conversion from Chapter 13 to Chapter 7.1 For many purposes, the date of the order for relief in the Chapter 13 case is “thrown back” to the date of filing of the Chapter 7 petition.2 The codebtor stay in § 13013 becomes effective as of the date of conversion.4 Postpetition consumer debts allowable under § 1305(a)(2)5 are measured from the date of conversion forward, perhaps creating a hole in the Code with respect to consumer debts incurred during the Chapter 7 case before conversion.6

[2]

Conversion immediately terminates the services of the Chapter 7 trustee.7 This automatic disposition of the trustee has been used by Chapter 7 debtors to gain control of litigation by converting to Chapter 13.8 That conversion was motivated by the debtor’s desire to wrest control of litigation from the Chapter 7 trustee has been cited as a reason to refuse conversion to Chapter 13.9

[3]

Conversion to Chapter 13 does not upset an order granting relief from the stay entered in the Chapter 7 case.10

[4]

Conversion does not resurrect rights that the debtor lost during the Chapter 7 case. For example, if the debtor’s right to assume an executory contract expired during the Chapter 7 case, conversion to Chapter 13 does not renew the lost opportunity.11

[5]

Section 348(f) was amended by the Bankruptcy Reform Act of 1994 to change the content of the estate and the extent of allowed secured claims at conversion from Chapter 13 to another chapter in cases filed after October 22, 1994.12 The 1994 amendments to § 348(f) do not apply at conversion from Chapter 7 to Chapter 13.13

[6]

Nothing in § 348 disturbs the preconversion entry of discharge in the Chapter 7 case. Although § 348 is quite specific with respect to the effect of conversion on many other sections of the Code,14 § 348 does not re-create personal liability if a discharge was entered before conversion. Subsections 727(d) and (e) specifically set out the circumstances under which the discharge in a Chapter 7 case can be revoked.15 There is no provision of § 348, § 727(d) or § 727(e) that revokes discharge at conversion absent fraud or one of the other circumstances stated in § 727(d).16

[7]

What then is the effect of conversion on debts that were discharged in the Chapter 7 case? This question is important for at least three reasons: (1) to determine eligibility for Chapter 13 at conversion from Chapter 7;17 (2) to determine the allowance of claims in the Chapter 13 case; and (3) to apply the tests for confirmation in the Chapter 13 case. The Code is not completely clear how the Chapter 7 discharge figures into the Chapter 13 case after conversion.

[8]

11 U.S.C. § 348(a) provides that conversion from Chapter 7 to Chapter 13 “does not effect a change in the date of the filing of the petition, the commencement of the case, or the order for relief.”18 There are exceptions to this rule in § 348(b). As discussed elsewhere,19 § 348(b) defines the order for relief for purposes of discharge under § 727(b) as the date of conversion when a Chapter 13 case is converted to Chapter 7. Section 348(b) does not have this same effect at conversion from Chapter 7 to Chapter 13. The discharge that was entered in the Chapter 7 case prior to conversion is not time shifted. In a Chapter 7 case converted to Chapter 13 after discharge, § 727(b) discharges the debtor “from all debts that arose before the date of the order for relief [in the Chapter 7 case], and any liability on a claim that is determined under section 502 of this title as if such claim had arisen before the commencement of the [Chapter 7 case].”20

[9]

Entry of discharge before conversion to Chapter 13 does not discharge debts that arose after the Chapter 7 petition except any debt that arose after the Chapter 7 petition that is treated by the Bankruptcy Code and allowed or disallowed under § 502 “as if” it arose before the Chapter 7 petition. A possible example of the exception would be a tax that arose after the Chapter 7 petition that was entitled to priority under § 507(a)(8), that would be determined under § 502(i) “as if such claim had arisen before the date of the filing of the [Chapter 7] petition,” but that was not excepted from discharge in the Chapter 7 case by § 523(a)(1).

[10]

For eligibility purposes in a Chapter 13 case, § 109(e) focuses on income and debts “on the date of the filing of the petition.”21 Section 348(a) preserves the Chapter 7 petition date as the date of the petition in the Chapter 13 case at conversion. Nothing in § 348(b) changes this “throwback” of the petition date. Several reported decisions conclude that, for eligibility purposes at conversion, debts are measured based on the original Chapter 7 schedules, and events during the Chapter 7 case—such as discharge or the settlement of debts—do not change the eligibility calculus.22

[11]

But ignoring the discharge for eligibility purposes at conversion becomes less certain when claims allowance cases are added to the picture. Section 727(b) speaks of discharging “the debtor” from “debts that arose before the date of the order for relief.”23 Reasoning that discharge of a debtor’s personal liability does not include discharging the liability of the Chapter 13 estate, some courts have held that debts discharged in a Chapter 7 case remain claims against the Chapter 13 estate at conversion. As explained by the bankruptcy court in In re Mosby:24

[T]he argument that once a discharge has been issued there are no debts for a plan to pay cannot be supported by a close reading of the Bankruptcy Code. The effect of a discharge is to prohibit collection of the discharged debt “as a personal liability of the debtor.” § 524(a) . . . . It does not, however, affect the liability of any other person or entity for the debt. § 524(e) . . . . In particular, nothing in the Code suggests that a discharge eliminates the creditor’s claim against the bankruptcy estate. . . . The bankruptcy estate comes into existence upon “the commencement of [the] case.” § 541(a) . . . . Claims against the estate, if objected to, are determined “as of the date of the filling of the [bankruptcy] petition.” § 502(b) . . . . The conversion of the case does not change the date of the commencement of the case or the date of the filing of the petition. § 348(a) . . . . Thus creditors with valid claims against the bankruptcy estate on the date the bankruptcy petition is filed do not lose them simply because the debtor is granted a discharge or the case is converted to another chapter.25
[12]

In contrast, other bankruptcy courts have held or at least assumed that at conversion after discharge the debts scheduled in the Chapter 7 case would not be entitled to distributions through the Chapter 13 plan. Stated by one court:

To permit a discharged debtor to convert his Chapter 7 case to a Chapter 13 case is ludicrous as Debtor no longer has any meaningful debts to repay pursuant to a Chapter 13 plan. His discharged creditors no longer have any right to either receive payment or object to confirmation of any plan proposed by the debtor. . . . [O]nce the Chapter 7 discharge has been granted, the Debtor’s personal liability is extinguished thus rendering the conversion meaningless, except as to those creditors holding non-dischargeable claims.26
[13]

Section 502(b)(1) disallows any claim that is “unenforceable against the debtor and property of the debtor, under any agreement or applicable law.”27 When it comes time to allow or disallow claims in the Chapter 13 case after conversion, it is arguable that the unsecured debt scheduled in the Chapter 7 case that was discharged under § 727(b) would be disallowed by § 502(b)(1) because that debt is “unenforceable against the debtor and property of the debtor” by virtue of § 727(b). But this assumes that it would be appropriate to consider the discharge entered after the Chapter 7 petition, notwithstanding that § 502(b) focuses the allowance of claims in the Chapter 13 case on the date of the Chapter 7 petition. And the distinction in the cases above between the personal liability of the debtor and the liability of the Chapter 13 estate would seem to allow the discharged debts even if the prior discharge is considered in the Chapter 13 case after conversion.

[14]

It seems unlikely that Congress intended conversion as a technique for debtors to avoid both liquidation in the Chapter 7 case and the payment of prepetition debts in the Chapter 13 case. If claims discharged in the Chapter 7 case are disallowed in the Chapter 13 case after conversion, creditors would be both precluded from sharing in the Chapter 7 estate and disallowed to receive distributions in the Chapter 13 case. The courts are not likely to go there.

[15]

It should be noted that debtors eligible for Chapter 13 relief can accomplish almost this outcome by first submitting to liquidation in a Chapter 7 case and then filing a new Chapter 13 case after discharge. Assuming the debtor avoids the simultaneously pending case problem,28 and assuming further that the obstacles to serial filing can be overcome,29 the debts discharged in the prior Chapter 7 case are not allowable in a subsequent Chapter 13 case30 and the difficulties that would attend conversion are avoided. The costs of this two-case approach are a second filing fee and attorney fee and the debtor must first undergo liquidation in a Chapter 7 case.

[16]

Notice is a big problem at conversion from Chapter 7 to Chapter 13. Most consumer Chapter 7 cases are no-asset cases in which creditors receive a notice from the clerk’s office instructing not to file proofs of claim. At conversion to Chapter 13, Bankruptcy Rule 2002 contemplates that the clerk, or some other person as the court directs, will send a new notice to all creditors informing them of the conversion, setting a date, time and place for another § 341 meeting of creditors and fixing the time allowed for filing claims pursuant to Rule 3002.31 In real life, such notices are problematic for creditors already once informed that the debtor is in bankruptcy (Chapter 7) and no recovery is likely (i.e., don’t file proofs of claim).The creditor that set its course of action (or inaction) in the Chapter 7 case is vulnerable at conversion to Chapter 13.

[17]

For example, in Nikoloutsos v. Nikoloutsos (In re Nikoloutsos),32 during the debtor’s Chapter 7 case, a creditor was granted relief from the stay and awarded a large judgment for malicious assault. The debtor converted to Chapter 13. The creditor filed a misguided complaint to determine dischargeability and filed many other papers but never articulated an objection to confirmation or an objection to the debtor’s eligibility to convert to Chapter 13. The bankruptcy and district courts held that the victim was bound by confirmation to accept a small distribution in full satisfaction of the judgment for assault. The befuddled victim never figured out how to act effectively after the conversion to Chapter 13. On further appeal, the Fifth Circuit saved the victim from herself by finding fraud by the debtor sufficient to revoke confirmation under § 133033 and return the case to Chapter 7.

[18]

Notice problems at conversion can work against the debtor. In Hairopoulos v. United States,34 the IRS received notice of the debtor’s no-asset Chapter 7 case and abided by the instruction not to file proofs of claim. When the debtor converted to Chapter 13, the notice of conversion and the order fixing the bar date for filing proofs of claim went astray and were never received by the IRS. The Chapter 13 plan confirmed without objection provided for priority tax claims. The IRS did not file a proof of claim. The Eighth Circuit rejected the debtor’s argument that the IRS was on “inquiry notice” of the conversion from Chapter 7 to Chapter 13 and, because of the defect in notice, the IRS’s claim was not discharged upon completion of payments under the plan.35

[19]

At conversion from Chapter 13 to Chapter 7, § 348(d) recharacterizes most debts that arose after the petition and before conversion as prepetition claims in the Chapter 7 case.36 Section 348(d) does not tell us what happens to a debt incurred after the filing of a Chapter 7 case and before conversion to Chapter 13.

[20]

Unless the court orders otherwise, upon conversion from Chapter 7 to Chapter 13, § 348(b) alters the language of § 1305(a)(2) so that proof of a postpetition claim may be filed under § 1305(a)(2) but only with respect to a consumer debt necessary for the debtor’s performance under the plan that arises after conversion.37 That some consumer debts described in § 1305(a)(2) arising after conversion can be allowable postpetition claims tells us nothing about debts incurred after the Chapter 7 petition and before conversion to Chapter 13. The alteration of § 1305(a)(2) by § 348(b) could be interpreted to signal that consumer debts arising during the Chapter 7 case before conversion to Chapter 13 are not postpetition claims under § 1305(a)(2).

[21]

Notice that § 1305(a)(1) is not affected by § 348(b) at conversion: a tax that becomes payable to a governmental unit “while the case is pending” can be a postpetition claim allowable under § 1305(a)(1).38 Because § 348(a) preserves the original Chapter 7 petition date as the date of “the commencement of the case,” a tax that becomes payable to a governmental unit between the filing of the original Chapter 7 case and conversion to Chapter 13 can qualify as a § 1305(a)(1) postpetition claim in the Chapter 13 case.39 It also might be an administrative expense under § 503(b)(1)(B).40 And there is also the possibility for a tax that arises after the Chapter 7 petition and before conversion that is entitled to priority under § 507(a)(8)—such a tax would be allowed or disallowed under § 502(i) as if the claim had arisen before the filing of the petition and could be dischargeable in the Chapter 7 case under § 727(b) except as provided in § 523(a)(1). Claims that arise during the Chapter 7 case and before conversion to Chapter 13 that are not taxes or consumer debts for purposes of § 1305 might qualify as administrative expenses under § 503(b)(1) if incurred for the actual, necessary costs and expenses of preserving the Chapter 7 estate.41

[22]

The characterization of debts arising during the Chapter 7 case before conversion to Chapter 13 significantly affects whether and by what deadline the creditor can or must file a proof of claim or request payment of an administrative expense, and affects the treatment of the debt during the plan and at discharge. For example, a tax claim arising during the Chapter 7 case that is (mis?)characterized as a prepetition priority claim after conversion to Chapter 13 must be timely filed42 to share in distributions, is payable without interest through the plan43 and will be discharged (with or without payment) at the completion of payments under the plan.44 If the tax is a postpetition claim under § 1305(a)(1), then the taxing authority can demand postpetition interest, can withhold filing a claim to leverage the debtor and can escape discharge in the Chapter 13 case.45 If the tax is an administrative expense, the taxing authority must make a “timely” request for payment;46 postpetition interest is unlikely because most plans treat administrative expenses the same as priority claims with full payment but no postpetition interest;47 and discharge is likely at the completion of payments under the plan.48

[23]

The timely filing of claims after conversion is somewhat complicated by the 1994 amendments to the Code and the 1996 changes to the Rules. As detailed elsewhere,49 in 1994, § 502(b)(9) of the Code was amended to provide that the claim of a governmental unit is timely filed if it is filed before 180 days after the date of the order for relief, “or such later time as the Federal Rules of Bankruptcy Procedure may provide.”50 At the time, the Bankruptcy Rules treated governmental and nongovernmental claims the same for purposes of counting the timeliness of proofs of claim—a proof of claim was timely filed “within 90 days after the first date set for the meeting of creditors called pursuant to section 341(a) of the Code.”51 The 1994 amendment to § 502(b)(9) changed the starting point for measuring timeliness for the filing of a proof of claim by a governmental unit to the date of the order for relief.

[24]

In 1996, the Rules Committee amended Bankruptcy Rule 3002 to reflect the 1994 Code changes. Bankruptcy Rule 3002 now measures the timely filing of a proof of claim for a governmental unit from the date of the order for relief, but the timely filing of a proof of claim for all other creditors is measured from the first date set for the meeting of creditors.52

[25]

The problem is that this difference in the starting point for measuring the timeliness for filing proofs of claim is not compensated for in the Code or Rules at conversion from Chapter 7 to Chapter 13. The Bankruptcy Code does not specifically restart the counting of the 180-day period in § 502(b)(9) when a Chapter 7 case converts to Chapter 13. In other words, timely filing of a proof of claim for a governmental unit after conversion from Chapter 7 to Chapter 13 is still counted from the “date of the order for relief or such later time as the Federal Rules of Bankruptcy Procedure may provide,” and the date of the order for relief at conversion for purposes of § 502(b)(9) is the original Chapter 7 petition date.53 Thus, theoretically, absent a contrary provision of the Rules, a conversion from Chapter 7 to Chapter 13 after 180 days after the filing of the Chapter 7 petition would leave the government with no period within which to timely file a proof of claim.

[26]

For all other (nongovernmental) claim holders, Bankruptcy Rule 3002(c) arguably restarts the 90-day filing period with the first date set for the § 341(a) meeting of creditors in the Chapter 13 case after conversion.54 There is no provision of the Rules that changes the counting of timeliness for proofs of claim by a governmental unit after conversion from Chapter 7 to Chapter 13.

[27]

The good news is, in most districts the notice to all creditors of conversion fixes a new bar date for the filing of proofs of claim. Governmental units are probably safe following the instructions in the notice of conversion and can timely file proofs of claim within the period stated in the notice notwithstanding that the 180-day period in § 502(b)(9) may expire at an earlier time.

[28]

One reported decision demonstrates that the government can get trapped in this glitch in the Rules. In United States v. Hambright (In re Hambright),55 the debtor filed a Chapter 7 petition on September 14, 1995. The notice of commencement instructed creditors not to file proofs of claim. The meeting of creditors was held on November 6, 1995. On December 14, 1995, the case converted from Chapter 7 to Chapter 13. On January 12, 1996, the bankruptcy court issued a second notice of commencement for the Chapter 13 case. Creditors were advised in this second notice that claims not filed by April 30, 1996, would not be allowed. The government filed a proof of claim for taxes on May 2, 1996, 230 days after the original Chapter 7 order for relief. The bankruptcy court disallowed the claim as untimely. On appeal, the district court affirmed.

[29]

The district court in Hambright observed that “conversion of a case from one type of action to another will not change the date upon which the 180-day period begins to run . . . . Thus, the bar date for the government’s proof of claim is not affected by conversion.”56 The district court rejected the government’s argument that the 180-day period in § 502(b)(9) should be “equitably tolled” for the period during the Chapter 7 case. The court noted that the government could have, consistent with Bankruptcy Rule 3002(c)(1), requested an extension of time in which to file a proof of claim had it acted before expiration of the original 180-day period.

[30]

The outcome in Hambright is unsettling. Had conversion to Chapter 13 occurred more than 180 days after the filing of the Chapter 7 petition, the government never would have known the need to move to extend the deadline for timely filing a proof of claim. The absence of a Rule for restarting the 180-day period for timely filing government claims after conversion to Chapter 13 defeats the intent behind § 502(b)(9), guarantees a lack of uniformity in what needs to be a predictable area of bankruptcy practice and invites government creditors to fall in the hole illustrated by Hambright. Confining Hambright to the fact that the government missed the new deadline fixed in the notice of commencement of the Chapter 13 case after conversion is not satisfying because any new deadline is within the bankruptcy court’s discretion once the initial 180 days expires. A Rules amendment should be considered to fill the gap by defining timeliness for proofs of claims by governmental units after conversion.

[31]

With respect to debts that arise after the Chapter 7 petition but before conversion to Chapter 13, which are not entitled to administrative priority under § 503(b) and which are not postpetition claims owed to a governmental unit under § 1305(a)(1), the Code appears silent. A Chapter 7 debtor who incurs postpetition consumer debt before conversion might amend the schedules to list the claim and propose some treatment through the plan. In the absence of objection, the binding effect of confirmation under § 1327(a)57 may enable the Chapter 13 debtor to deal with the debt notwithstanding the absence of guidance in the Code.

[32]

Although not without controversy, preconversion fees for the Chapter 7 trustee and for professional services in the Chapter 7 case are generally allowable as priority administrative expenses and are entitled to full payment in the Chapter 13 plan under § 1322(a)(2).58 This is true because § 503(b)(2) includes in the definition of administrative expenses “compensation and reimbursement awarded under § 330(a) of this title.”59 Section 330(a) allows the bankruptcy court to award a trustee or a professional person employed by a trustee “reasonable compensation for actual, necessary services rendered by such trustee, . . . professional person, or attorney.”60 One reported decision allowed attorney fees to the debtor’s Chapter 7 counsel as administrative expenses in the Chapter 13 case after conversion notwithstanding the omission of the debtor’s attorney from the list of professionals entitled to compensation from the estate under § 330(a).61 The Supreme Court’s subsequent decision in Lamie v. United States Trustee62 precludes recovery of preconversion fees for the debtor’s attorney as an administrative expense.

[33]

Chapter 7 trustees run into problems seeking compensation under § 330(a) after conversion from Chapter 7 to Chapter 13. The award of compensation to a Chapter 7 trustee under § 330(a) is “subject to” § 326.63 Section 326(a) conditions the allowance of compensation to a trustee that certain maximum percentages are payable “upon all monies disbursed or turned over in the case by the trustee.”64 It can be argued that a Chapter 7 trustee’s right to the compensation described in § 326(a) is allowable under § 330(a) and becomes an administrative expense under § 503(b)(2) only if the trustee has “disbursed or turned over” monies during the Chapter 7 case. When the Chapter 7 case converts to Chapter 13 before the trustee makes a distribution to creditors, the trustee’s entitlement to compensation as an administrative expense is problematic. Reading §§ 326(a) and 330(a) strictly, it has been held that the Chapter 7 trustee is not entitled to an administrative expense for compensation after conversion to Chapter 13 but can recover expenses of administration incurred during the Chapter 7 case.65

[34]

One way or another most of the reported decisions interpret § 1326(a) to permit allowance of Chapter 7 trustee’s fees and expenses as administrative expenses after conversion to Chapter 13. It has been held that at conversion to Chapter 13 before distribution in the Chapter 7 case, it is not appropriate to apply the maximum percentages in § 326(a), but instead the Chapter 7 trustee is entitled to “reasonable compensation and reimbursement for actual and necessary expenses under § 330(a), to be treated as an administrative expense.”66 One court held that after conversion to Chapter 13, the Chapter 7 trustee is allowed a priority administrative expense equal to the difference between the maximum fee calculated under § 326(a) and the amount allowed the Chapter 13 trustee as a percentage fee under 28 U.S.C. § 586(e).67 In contrast, another court concluded that after conversion, the Chapter 7 trustee is allowed a maximum administrative expense equal to the sum of all distributions to creditors in the Chapter 13 case, and compensation to the Chapter 13 trustee is not aggregated with the administrative expenses of the Chapter 7 trustee for purposes of § 1326(a).68

[35]

In In re Collins,69 after conversion, the Chapter 7 trustee was awarded expenses and attorneys’ fees under § 330 “allowed as a secondary § 507 administrative claim to be incorporated into the Chapter 13 plan and paid in full through pro rated distributions.”70 One court limited compensation after conversion to the minimum (presently $60) authorized by § 330(b) when the trustee discovered unencumbered assets in the Chapter 7 case and prompted the conversion to Chapter 13, but the trustee’s efforts did not result in a disbursement to creditors in the Chapter 7 case.71 In In re Stabler,72 the court allowed the Chapter 7 trustee an administrative expense for compensation calculated on a quantum meruit basis when the Chapter 7 trustee performed substantial services but did not disburse monies.73 Attorneys’ fees and expenses incurred by the Chapter 7 trustee or by an attorney for the Chapter 7 trustee after the date of conversion are unauthorized and are not allowable claims in the Chapter 13 case.74

[36]

Determining exemptions at conversion from Chapter 7 to Chapter 13 presents some variations on the issues discussed above with respect to conversion from Chapter 13 to Chapter 7.75 Section 522(b)(2)(A) permits the exemptions available under applicable state or federal law “on the date of the filing of the petition.”76 Under § 348(a) of the Code, conversion from Chapter 7 to Chapter 13 “does not effect a change in the date of the filing of the petition.”77 The interaction of §§ 522(b)(2)(A) and 348(a) convinced the U.S. Court of Appeals for the Tenth Circuit to hold that the law in effect at the filing of the original Chapter 13 case controls the exemptions available to a debtor when the case converted to Chapter 7.78 This same logic should apply upon conversion from Chapter 7—the exemptions available in the Chapter 13 case should be determined based on the law in effect at the filing of the Chapter 7 petition.

[37]

The Code and reported decisions are not so clear with respect to what facts determine exemptions at conversion from Chapter 7 to Chapter 13. As discussed above,79 upon conversion from Chapter 13 to Chapter 7, some cases hold that the facts at the time of conversion control exemptions in the Chapter 7 case. Some, but not all, courts determine eligibility for Chapter 13 relief based on the facts at the time of conversion from Chapter 7, notwithstanding that the petition date is “thrown back” to the filing of the Chapter 7 case.80 Applying this rule, the facts at conversion from Chapter 7 to Chapter 13 should control the exemptions available in the Chapter 13 case.

[38]

But other courts, including the U.S. Court of Appeals for the Fifth Circuit, hold that at conversion from Chapter 13 to Chapter 7, exemptions are determined as of the date of the Chapter 13 petition.81 This rule would require bankruptcy courts to look back to the date of the Chapter 7 petition to determine the exemptions available at conversion from Chapter 7 to Chapter 13.

[39]

These uncertainties can make quite a difference at confirmation of the Chapter 13 plan. For example, exemptions are important at confirmation for purposes of the best-interests-of-creditors-test in § 1325(a)(4).82 Courts following the Tenth Circuit’s rule in Marcus v. Zeman (In re Marcus)83 would hold that the law in effect at the filing of the Chapter 7 petition controls the exemptions available upon conversion to Chapter 13. Some courts would then apply that (earlier) law to the (later) facts at the time of conversion from the Chapter 7 to the Chapter 13 case. But § 1325(a)(4) then requires the court to perform a hypothetical liquidation under Chapter 7 “as of the effective date of the plan.”84 The effective date of the plan will be a different date than the date of conversion. Exemptions for purposes of the best-interests-of-creditors test after conversion from Chapter 7 might be calculated based on the facts as of the effective date of the plan, rather than the facts at the date of conversion (or the facts at the filing of the Chapter 7 petition). Exemptions are a moving target in a Chapter 13 case after conversion from Chapter 7.

[40]

In cases filed after October 22, 1994, § 348(f) redefines property of the estate at conversion from Chapter 13 to another chapter.85 New § 348(f) impacts the exemptions available to Chapter 13 debtors after conversion.86 Section 348(f) does not apply at conversion from Chapter 7 to Chapter 13 and thus will not affect exemptions at conversion from Chapter 7 to Chapter 13.87

[41]

Timing issues also arise with respect to discharge at conversion from Chapter 7 to Chapter 13. Does the law in effect at the filing of the original Chapter 7 petition define the discharge available after conversion to Chapter 13? That Congress has enacted new exceptions to discharge in Chapter 13 cases several times in recent years88 makes this question especially important.

[42]

For example, in In re Stanton,89 at the filing of the Chapter 7 petitions, criminal restitution was nondischargeable in a Chapter 7 case but dischargeable in a Chapter 13 case because of the Supreme Court’s decision in Pennsylvania Department of Public Welfare v. Davenport.90 After Davenport, Congress acted quickly to amend § 1328(a) to except criminal restitution from discharge in Chapter 13 cases.91 In Stanton, the motions to convert were filed after the effective date of the amendments rendering restitution nondischargeable in Chapter 13 cases. The court held that the exceptions to dischargeability in effect at the time of conversion controlled the dischargeability of debts in the Chapter 13 cases; thus, the debtors’ criminal restitution debts were nondischargeable notwithstanding that those same debts would have been dischargeable had the debtors filed Chapter 13 cases in the first instance.

[43]

The holding in Stanton is inconsistent with the plain language of the 1990 amendments. The Criminal Victims Protection Act of 199092 amended § 1328(a) to render restitution nondischargeable upon completion of payments in Chapter 13 cases.93 Section 4(b) of that Act unambiguously provided: “The amendments made by this Act shall not apply with respect to cases commenced under title 11 of the United States Code before the date of the enactment of this Act.”94 The (first) enactment date of the 1990 amendment with respect to restitution was November 15, 1990.95 The bankruptcy cases in Stanton were commenced under title 11 before November 15, 1990.96 That the debtors converted to Chapter 13 after the enactment date of the 1990 legislation should have been irrelevant. Section 4(b) of the 1990 legislation precluded application of the (new) exception to discharge for restitution to the debtors in Stanton.

[44]

In the absence of clear legislative direction, some courts have held that discharge in bankruptcy is determined by the law in effect at the filing of the petition.97 Other courts have held that discharge is determined by the law in effect at the time the court determines whether to grant or deny a discharge.98 The outcome of this debate could have particularly strange effects in Chapter 7 cases converted to Chapter 13 in which the debtor seeks to discharge educational loans.

[45]

Educational loans described in § 523(a)(8) were rendered nondischargeable after completion of payments in Chapter 13 cases by legislation enacted on November 5, 1990.99 The 1990 legislation stated that the exception to discharge for educational loans “shall not apply to any case under the provisions of title 11, United States Code, commenced before the date of the enactment of this Act.”100 However, the same legislation contained a sunset provision that the exception to discharge for educational loans in Chapter 13 cases will “cease to be effective” on October 1, 1996.101 In 1992, Congress quietly102 repealed the sunset provision, effective October 1, 1992.103

[46]

In a Chapter 7 case commenced before November 5, 1990, and converted to Chapter 13 after November 5, 1990, the law in effect at the filing of the Chapter 7 petition would control and student loans would be dischargeable at the completion of payments in the Chapter 13 case. In a Chapter 7 case commenced after October 1, 1992, and converted to Chapter 13, the opposite would be true—student loans would be nondischargeable at the completion of payments in the Chapter 13 case because the sunset provision in the 1990 legislation had been repealed. What can be said about the dischargeability of student loans in a Chapter 7 case filed after November 5, 1990, but before October 1, 1992, that is converted to Chapter 13 and in which the debtor becomes entitled to a discharge after October 1, 1996? If the law in effect at the filing of the Chapter 7 case controls discharge, would that entitlement include the sunset provision of the 1990 legislation?104

[47]

Chapter 13 debtors have an absolute right to convert to Chapter 7 notwithstanding that the case was previously converted from Chapter 7 to Chapter 13. Unlike reconversion from Chapter 7 to Chapter 13 under § 706(a),105 no provision in § 1307(a) limits reconversion of a Chapter 13 case to Chapter 7.106


 

1  See discussions beginning at § 142.1  New Schedules, Statement, Meeting of Creditors and Deadlines§ 143.1  In Cases Filed before October 22, 1994§ 144.1  Exemptions at Conversion and § 145.1  In Cases Filed before October 22, 1994.

 

2  11 U.S.C. § 348(a). See below in this section, and see § 148.2  Absolute Right of Debtor?§ 148.3  Effects of Conversion from Chapter 7 to Chapter 13 and § 148.4  Conversion to Chapter 13 after BAPCPA. But see § 348(b) (Date of order for relief is date of conversion for purposes of codebtor stay in § 1301(a) and for postpetition claims under § 1305(a).).

 

3  See discussions beginning at § 65.1  Cosigners and Joint Obligors Are Protected§ 66.1  Motion Practice and § 67.1  Codebtor Received the Consideration.

 

4  11 U.S.C. § 348(b).

 

5  See § 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

6  See below in this section.

 

7  11 U.S.C. § 348(e).

 

8  See Cable v. Ivy Tech State College (In re Cable), 200 F.3d 467, 472–73 (7th Cir. 1999) (At conversion from Chapter 7 to Chapter 13, Chapter 13 debtor was automatically substituted for Chapter 7 trustee in ADA action. Debtor filed ADA suit while in Chapter 7. Chapter 7 trustee was substituted as the party plaintiff. Unhappy with the Chapter 7 trustee’s proposed settlement of the suit, the debtor converted from Chapter 7 to Chapter 13. After conversion, district court granted summary judgment on the ADA claim against the Chapter 7 trustee, apparently unaware of the conversion. Chapter 13 debtor then appealed dismissal, and defendant in ADA suit challenged the Chapter 13 debtor’s standing to appeal. “At the moment the bankruptcy court granted Cable’s motion to convert, the Chapter 7 trustee lost jurisdiction over the case. . . . A motion to substitute the debtor-in-possession or Chapter 13 trustee for the former Chapter 7 trustee would certainly lend clarity to the ongoing litigation. Yet it is unnecessary because the substitution for a Chapter 7 trustee occurs by operation of law. The Bankruptcy Code strongly favors a seamless transition from one chapter to another . . . . When the conversion order was entered, the Chapter 7 trustee automatically dropped out of the discrimination case, and the property of the estate, including the lawsuit, returned to the debtor under the guidance of the Chapter 13 trustee. . . . At that point, Cable as debtor-in-possession became the real party in interest to prosecute the case on behalf of the estate. The oversight in changing the names of the bankruptcy trustees cannot frustrate the purposes of the Code and the interests of the creditors.”); In re Wirmel, 134 B.R. 258 (Bankr. S.D. Ohio 1991) (Conversion from Chapter 7 to Chapter 13 divests the Chapter 7 trustee of control over the settlement of the debtor’s civil rights action. The debtor’s right to sue and be sued may be exercised concurrently with the Chapter 13 trustee, but the Chapter 13 debtor controls the lawsuit after conversion, subject only to the rights of creditors to object to any settlement the debtor may propose.).

 

9  See § 148.2  Absolute Right of Debtor? and § 148.4  Conversion to Chapter 13 after BAPCPA. See, e.g., In re Wampler, 302 B.R. 601 (Bankr. S.D. Ind. 2003) (Conversion from Chapter 7 to Chapter 13 is denied because debtor understated the value of a lawsuit and then sought conversion after Chapter 7 trustee sought to administer the larger recovery actually received by the debtor.); In re Gallagher, 283 B.R. 604 (Bankr. M.D. Fla. 2002) (Debtor’s motion to convert Chapter 7 case to Chapter 13 after discharge is denied because purpose of conversion was to gain control of the proceeds from a lawsuit that the Chapter 7 trustee settled and conversion would only benefit the debtor or the debtor’s attorney.); In re Pakuris, 262 B.R. 330, 335–36 (Bankr. E.D. Pa. 2001) (Conversion from Chapter 7 to Chapter 13 after discharge is not absolute and is denied when purpose is to wrest control from the Chapter 7 trustee of the settlement of litigation with the debtor’s ex-spouse. Debtor did not disclose litigation with ex-spouse concerning distribution of property. Based on an anonymous letter, Chapter 7 trustee reopened Chapter 7 case to administer the asset and sought approval of a property settlement agreement. The debtor responded with a motion to convert to Chapter 13. “[A] review of the facts of the particular case is appropriate when considering an objection to a § 706(a) motion. The Third Circuit Court of Appeals has held that chapter 13 petitions must be filed in good faith. In re Lilley, Jr., 91 F.3d 491, 496 (3d Cir. 1996). It follows that conversion to a chapter 13 case must likewise be sought in good faith since the bankruptcy court can reconvert the case to chapter 7 under 11 U.S.C. § 1307(c) for cause. . . . [T]he debtor’s so-called ‘absolute’ right of conversion under § 706(a) must be read in conjunction with (and tempered by) Code Sections 706(d) and 1307(c). In deciding a contested motion to convert under § 706(a) this Court will consider the totality of the circumstances . . . . [T]he debtor’s motivation for conversion is not to repay her creditors, but to regain control of the equitable distribution part of her marital litigation. . . . [T]he debtor placed herself voluntarily into a chapter 7 proceeding and has obtained the benefits of the proceeding, including a chapter 7 discharge. . . . [H]aving accepted the benefits of her chapter 7, the debtor’s attempt to avoid the consequences thereof, by converting to chapter 13 at this time, demonstrates a failure to meet the good faith requirement.”); In re Johnson, 262 B.R. 75 (Bankr. E.D. Ark. 2001) (Conversion from Chapter 7 to Chapter 13 is denied based on evidence that debtor moved to convert after the Chapter 7 trustee filed an adversary proceeding to recover fraudulent transfer of concealed asset.).

 

10  Hemontolor v. First Fed. Sav. & Loan Ass’n, 38 B.R. 340 (M.D. Tenn. 1984). Accord Masterson v. Berkeley Fed. Bank & Trust (In re Masterson), 189 B.R. 250, 252 (Bankr. D.R.I. 1995) (Conversion from Chapter 7 to Chapter 13 after the grant of stay relief does not reimpose stay. Foreclosure sale after relief from the stay was effective and is not avoidable. “[O]ne court has held that conversion effects a second stay. In In re Nichols, 134 B.R. 236, 238–39 (Bankr. S.D. Ohio 1991). Nichols’ rationale is unpersuasive. . . . ‘[O]nce the automatic stay is modified or lifted in a case, that final judgment is not automatically vacated or annulled by the subsequent conversion of the case to another chapter.’”).

 

11  Veterans Admin. v. Benson (In re Benson), 76 B.R. 381 (Bankr. D. Del. 1987).

 

12  See § 143.2  In Cases Filed after October 22, 1994, § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA, § 145.2  In Cases Filed after October 22, 1994, § 145.3  Lienholders’ Rights at Conversion under § 348(f) after BAPCPA, § 146.2  Strategic Considerations: Costs and Benefits of Conversion to Chapter 11§ 146.3  Incentives to Convert to Chapter 11 after BAPCPA, § 147.1  Standing, Procedure and Strategic Considerations and § 147.2  Incentives to Convert to Chapter 12 after BAPCPA.

 

13  The effects of § 348(f) at reconversion from Chapter 13 to Chapter 7 are discussed in § 150.1  Reconversion from Chapter 7 or Chapter 11 to Chapter 13 and § 150.2  Reconversion to Chapter 13 after BAPCPA.

 

14  See, e.g., 11 U.S.C. § 348(b), (c).

 

15  11 U.S.C. § 727(d) and (e) provide:

(d) On request of the trustee, [or] a creditor, or the United States trustee, and after notice and a hearing, the court shall revoke a discharge granted under subsection (a) of this section if—
(1) such discharge was obtained through the fraud of the debtor, and the requesting party did not know of such fraud until after the granting of such discharge;
(2) the debtor acquired property that is property of the estate, or became entitled to acquire property that would be property of the estate, and knowingly and fraudulently failed to report the acquisition of[,] or entitlement to[,] such property, or to deliver or surrender such property to the trustee; or
(3) the debtor committed an act specified in subsection (a)(6) of this section.
(e) The trustee, [or] a creditor, or the United States trustee may request a revocation of a discharge—
(1) under subsection (d)(1) of this section[,] within one year after such discharge is granted; or
(2) under subsection (d)(2) or (d)(3) of this section before the later of—
(A) one year after the granting of such discharge; and [or]
(B) the date the case is closed.

 

16  See In re Oblinger, 288 B.R. 781, 788 (Bankr. N.D. Ohio 2003) (Chapter 7 case can be converted to Chapter 13 after discharge and the discharge order need not be vacated. “Despite the apparent awkwardness of two discharges under different Bankruptcy Code sections in the same case, the court cannot find anything in the letter or logic of the Bankruptcy Code or the Federal Rules of Bankruptcy Procedure to which its unease can be anchored. There is nothing in the Bankruptcy Code that prohibits two discharges in the same case.”); In re Carter, 285 B.R. 61, 68 (Bankr. N.D. Ga. 2002) (Chapter 7 case can be converted to Chapter 13 after discharge. “[I]f Congress had intended to prevent a debtor from receiving both a Chapter 7 and Chapter 13 discharge in the same case, it could have included a statutory prohibition in either § 348 . . . or in § 1328 . . . . [T]here is no sound reason to adopt a bright line rule that requires the vacation of a Chapter 7 discharge before allowing a conversion to Chapter 13.”); In re Mosby, 244 B.R. 79 (Bankr. E.D. Va. 2000) (Nothing in the Bankruptcy Code requires that the Chapter 7 discharge be vacated as a condition of conversion to Chapter 13.); In re Safley, 132 B.R. 397 (Bankr. E.D. Ark. 1991) (If eligibility for conversion from Chapter 7 to Chapter 13 is determined as of the motion to convert, conversion would be meaningless if a discharge has been entered in the Chapter 7 case because no debt remains to be dealt with in the Chapter 13 case.); In re Sieg, 120 B.R. 533 (Bankr. D.N.D. 1990) (Neither § 706(a) nor § 348 requires vacating or revoking the Chapter 7 discharge when a Chapter 7 case is converted to Chapter 13.). See also Markovich v. Samson (In re Markovich), 207 B.R. 909, 910 n.2, 911 (B.A.P. 9th Cir. 1997) (At conversion from Chapter 7 to Chapter 13, the debtor lacks standing to set aside the discharge in the prior Chapter 7 case under § 727(d). After discharge in Chapter 7 case, dischargeability complaint under § 523(a)(2)(A) was decided against the debtor. The debtor moved to vacate the discharge order and convert the Chapter 7 case to Chapter 13. “Section 727(d) allows a trustee, a creditor, or the United States Trustee to ask the court to revoke a discharge. . . . Section 727(d) does not authorize a debtor to bring a motion to revoke a discharge.” The BAP notes, “Nothing was to be gained by moving to vacate the discharge in Debtor’s chapter 7 case. The nondischargeable claim could be discharged in either a converted chapter 13 or a new chapter 13 case filed by Debtor.”).

 

17  See also § 148.2  Absolute Right of Debtor? and § 148.4  Conversion to Chapter 13 after BAPCPA.

 

18  11 U.S.C. § 348(a). See § 140.4  11 U.S.C. § 348: Effects of Conversion.

 

19  See § 314.1 [ On Postpetition Claims ] § 142.5  On Postpetition Claims.

 

20  11 U.S.C. § 727(b).

 

21  11 U.S.C. § 109(e). See §§ 8.2 [ When Must Debtor Have Regular Income? ] § 11.2  When Must Debtor Have Regular Income? and 12.1 [ Time for Determining Debt ] § 14.2  Time for Determining Debt.

 

22  See, e.g., In re Rohl, 298 B.R. 95 (Bankr. E.D. Mich. 2003) (Conversion from Chapter 7 to Chapter 13 is denied because debtor is ineligible for Chapter 13 based on the amount of debt scheduled at the Chapter 7 petition, and settlements or recharacterizations of debts during the Chapter 7 case do not change the eligibility calculation. ); In re Grew, 278 B.R. 619 (Bankr. M.D. Fla. 2002) (Debtor is ineligible to convert from Chapter 7 to Chapter 13 based on debts scheduled in the Chapter 7 case; that claims actually filed in the Chapter 7 case are below the eligibility limits for conversion is “of no consequence.”); In re Pisczek, 269 B.R. 641 (Bankr. E.D. Mich. 2001) (At conversion from Chapter 7, eligibility for Chapter 13 is measured as of the date of the filing of the Chapter 7 petition.); In re Stern, 266 B.R. 322, 325–27 (Bankr. D. Md. 2001) (At conversion from Chapter 7 to Chapter 13, “[t]he debtor’s eligibility is judged as of the original date of the filing of the bankruptcy petition, because the conversion of the case from one chapter to another ‘does not effect a change in the date of the filing of the petition.’ . . . Because the Court has found the debtor to be ineligible to convert the case to Chapter 13, it need not decide whether the discharge that was entered before the case was converted should be revoked.”); In re Safley, 132 B.R. 397 (Bankr. E.D. Ark. 1991) (If eligibility for Chapter 13 relief at conversion is determined as of the filing of the original Chapter 7 petition, debtor was not eligible because Chapter 7 schedules indicated debt in excess of the eligibility limits for Chapter 13.); In re Bush, 120 B.R. 403 (Bankr. E.D. Tex. 1990) (At conversion from Chapter 7 to Chapter 13, eligibility is determined based on the facts at the filing of the original Chapter 7 case, including that debts are contingent or unliquidated at that time.). See also § 148.2  Absolute Right of Debtor?.

 

23  11 U.S.C. § 727(b).

 

24  244 B.R. 79 (Bankr. E.D. Va. 2000).

 

25  244 B.R. at 87. Accord In re Carter, 285 B.R. 61, 68–69 (Bankr. N.D. Ga. 2002) (At conversion to Chapter 13 after discharge in a Chapter 7 case, creditors still have claims against the Chapter 13 estate. “[C]reditor claims are not extinguished by the granting of a Chapter 7 discharge and can still be enforced against the property of the debtor’s bankruptcy estate. . . . [T]here is no specific bar within the Code to prohibit creditors’ claims from being paid through a Chapter 13 plan, notwithstanding the fact that the debtor’s personal liability for those claims has been extinguished.”); In re Agresta, No. 5-97-01568, 2000 WL 1639570, at *2 (Bankr. M.D. Pa. May 24, 2000) (unpublished) (At conversion to Chapter 13 after discharge in the Chapter 7 case, claims that existed at the filing of the Chapter 7 petition must be addressed through the Chapter 13 plan because only the debtor’s personal liability was discharged in the Chapter 7 case. “The fact that the Debtor received a discharge under Chapter 7 and later converted to Chapter 13 does not harm the creditors. The Debtor’s conversion to Chapter 13 would relate to May 29, 1997, the original date of filing under Chapter 7. This original date of filing is also the measuring point for creditor’s [sic] proof of claims. While the chapter 7 discharge extinguished the Debtor’s personal liability towards the creditors, it does not cancel the claim. The claim is still pending to be addressed under the Chapter 13 Plan.”).

 

26  In re Marcakis, 254 B.R. 77, 82–83 (Bankr. E.D.N.Y. 2000). Accord In re Rigales, 290 B.R. 401, 407–08 (Bankr. D.N.M. 2003) (Applying Mason v. Young (In re Young), 237 F.3d 1168 (10th Cir. 2001),“[w]hen a debtor converts to Chapter 13 after the Chapter 7 discharge, but before the estate property is liquidated, he has received all of the benefits of Chapter 7 without any of the burdens, because he regains his nonexempt property, and his debts have all been discharged. . . . [M]ost of the debts do not survive the Chapter 7 discharge to be administered in the Chapter 13 reorganization. All dischargeable debts are wiped out by the Chapter 7 discharge. Those creditors’ claims are wiped out and, therefore, are not included in the Chapter 13 plan. Those creditors have no standing to object to the provisions of the plan and are left with nothing . . . . Congress should change the language of § 706(a) and qualify the right to convert eliminating post-discharge conversions from Chapter 7 to 13 in order to fully administer a bankruptcy estate in Chapter 7 once a discharge has been entered.”); In re Sieg, 120 B.R. 533 (Bankr. D.N.D. 1990) (At conversion from Chapter 7 to Chapter 13 after discharge in the Chapter 7 case, the only debts to be managed through the Chapter 13 plan are debts that survived the Chapter 7 discharge.).

 

27  11 U.S.C. § 502(b)(1).

 

28  See § 19.1 [ Eligibility of a Simultaneous Filer ] § 22.1  Eligibility of a Simultaneous Filer.

 

29  See § 23.1  Eligibility of a Serial Filer: “Chapter 20” and Beyond and § 23.2  Eligibility of Repeat Filers after BAPCPA.

 

30  See § 85.5  Debts Discharged in Prior Bankruptcy and Nonrecourse Debts, § 138.4  Nonrecourse Claims and Claims Discharged in Prior Bankruptcy Case, § 138.10  Chapter 7 Trustee Compensation: § 1326(b)(3) after BAPCPA, § 148.2  Absolute Right of Debtor? and § 148.4  Conversion to Chapter 13 after BAPCPA.

 

31  Fed. R. Bankr. P. 2002(a)(1), (a)(4), (f)(1)–(3).

 

32  222 B.R. 297 (E.D. Tex. 1998), rev’d, 199 F.3d 233 (5th Cir. 2000).

 

33  See § 224.1 [ Revocation of Confirmation ] § 117.3  Revocation of Confirmation.

 

34  193 B.R. 889 (E.D. Mo. 1996), aff’d, 118 F.3d 1240 (8th Cir. 1997).

 

35  118 F.3d at 1245–46 (“While we recognize that in some circumstances a creditor may be discharged because it failed to properly further inquire once it had some notice of bankruptcy proceedings, the focus of the due process inquiry is on ‘the duty of the debtor [or in this case the bankruptcy court] to give notice of the relevant dates, not on the relative ease with which a creditor can obtain the information without such notice.’ . . . [W]e note the distinction between a Chapter 7 proceeding, where the government could reasonably assume that its tax claim was nondischargeable . . . and a Chapter 13 proceeding where the tax claim does not fit within an exception to the discharge provision. . . . In sum, we conclude that any ‘notice’ given in this case was insufficient to satisfy due process and fundamental fairness. As such, the taxes were not ‘provided for’ by the plan and were therefore not discharged under § 1328(a).”). Compare United States v. Hambright (In re Hambright), 216 B.R. 781 (W.D. Mich. 1997) (Conversion from Chapter 7 to Chapter 13 does not begin a new counting of the 180-day bar to the filing of a timely proof of claim by the IRS under § 502(b)(9) or Bankruptcy Rule 3002(c). IRS’s claim filed 230 days after filing of the Chapter 7 petition is untimely, and equitable tolling is not available because the IRS did have 100 days’ notice of the bar date after the case was converted to Chapter 13.).

 

36  See § 138.10  Chapter 7 Trustee Compensation: § 1326(b)(3) after BAPCPA and § 142.5  On Postpetition Claims.

 

37  Postpetition claims for consumer debts that arise after the filing of a Chapter 13 petition are discussed in § 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA. 11 U.S.C. § 348(b) also provides, upon conversion from Chapter 7 to Chapter 13, that the stay of actions against codebtors in § 1301(a) is effective from the date of conversion. See discussion beginning at § 65.1  Cosigners and Joint Obligors Are Protected§ 66.1  Motion Practice and § 67.1  Codebtor Received the Consideration.

 

38  Postpetition tax claims are discussed in § 132.9  Postpetition Claims, § 136.2  Taxes before BAPCPA§ 136.3  Taxes after BAPCPA, § 136.17  Postpetition Interest on Priority Claims after BAPCPA, § 137.1  Postpetition Claims before BAPCPA§ 137.2  Postpetition Claims after BAPCPA and § 138.10  Chapter 7 Trustee Compensation: § 1326(b)(3) after BAPCPA.

 

39  See, e.g., In re Hudson, 158 B.R. 670 (Bankr. N.D. Ohio 1993) (Upon conversion from Chapter 7 to Chapter 13, the date from which to determine whether a tax claim is prepetition or postpetition is the date of filing of the original Chapter 7 petition because of § 348(a). When Chapter 7 petition was filed on February 12, 1985, and converted to Chapter 13 on March 27, 1987, taxes for 1985 and 1986 are postpetition taxes in the Chapter 13 case.).

 

40  See § 136.2  Taxes before BAPCPA§ 136.3  Taxes after BAPCPA, § 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

41  See discussion beginning at § 136.1  Treatment of Priority Claims. See also discussion of preconversion fees below in this section.

 

42  See below in this section, and see § 279.1 [ Priority Claims, Including Requests for Payment of Administrative Expenses ] § 132.6  Priority Claims, Including Requests for Payment of Administrative Expenses.

 

43  See § 73.5  Interest Not Required, with Exceptions§ 73.6  Treatment of Priority Claims Changed by BAPCPA, § 136.16  Postpetition Interest on Priority Claims before BAPCPA and § 136.17  Postpetition Interest on Priority Claims after BAPCPA.

 

44  See § 157.1  Broadest Discharge Available and § 157.2  BAPCPA Shrank the Discharge.

 

45  See § 132.9  Postpetition Claims, § 136.2  Taxes before BAPCPA, § 136.3  Taxes after BAPCPA, § 137.1  Postpetition Claims before BAPCPA§ 137.2  Postpetition Claims after BAPCPA, § 138.10  Chapter 7 Trustee Compensation: § 1326(b)(3) after BAPCPA, § 158.6  Postpetition Claims and § 159.9  Chapter 7 Trustee Compensation: § 1326(d).

 

46  See §§ 275.2 [ In General: Filing is Required for Allowance ] § 132.2  In General: Filing is Required for Allowance, 279.1 [ Priority Claims, Including Requests for Payment of Administrative Expenses ] § 132.6  Priority Claims, Including Requests for Payment of Administrative Expenses and 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims. Notice that Bankruptcy Rule 1019(6)—which defines “timely” for purposes of a request for an administrative expense at conversion from Chapter 13 to Chapter 7—does not apply at conversion from Chapter 7 to Chapter 13 but does apply at reconversion from Chapter 13 to Chapter 7.

 

47  See § 73.2  What Claims Are Priority Claims?, § 73.3  Priority Claims Added or Changed by BAPCPA§ 73.5  Interest Not Required, with Exceptions, § 73.6  Treatment of Priority Claims Changed by BAPCPA§ 136.1  Treatment of Priority Claims§ 136.3  Taxes after BAPCPA, § 136.16  Postpetition Interest on Priority Claims before BAPCPA and § 136.17  Postpetition Interest on Priority Claims after BAPCPA

 

48  See § 359.1 [ On Administrative Expenses ] § 162.5  On Administrative Expenses.

 

49  See discussion beginning at § 132.1  1994 Code Amendments Changed the Rules and § 133.5  Tax Claim Exception after BAPCPA.

 

50  11 U.S.C. § 502(b)(9).

 

51  Fed. R. Bankr. P. 3002(c) (prior to amendment in 1996).

 

52  See Fed. R. Bankr. P. 3002(c).

 

53  See 11 U.S.C. § 348(a).

 

54  See Fed. R. Bankr. P. 3002(c) (“[A] proof of claim is timely filed if it is filed not later than 90 days after the first date set for the meeting of creditors called under § 341(a) of the Code.”).

 

55  216 B.R. 781 (W.D. Mich. 1997).

 

56  216 B.R. at 783.

 

57  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

58  In re Rodriguez, 240 B.R. 912 (Bankr. D. Colo. 1999); In re Colburn, 231 B.R. 778 (Bankr. D. Or. 1999); In re Bottone, 226 B.R. 290 (Bankr. D. Mass. 1998); In re Collins, 210 B.R. 538 (Bankr. N.D. Ohio 1997); In re Wells, 87 B.R. 732 (Bankr. N.D. Ga. 1988); In re Stabler, 75 B.R. 135 (Bankr. M.D. Fla. 1987); In re Woodworth, 70 B.R. 361 (Bankr. N.D.N.Y. 1987). See also § 136.4  Trustee’s Fees and Expenses before BAPCPA§ 136.5  Trustees’ Fees and Expenses after BAPCPA, § 136.6  Debtors’ Attorneys’ Fees before BAPCPA§ 136.7  Debtors’ Attorneys’ Fees after BAPCPA and § 138.10  Chapter 7 Trustee Compensation: § 1326(b)(3) after BAPCPA.

 

59  11 U.S.C. § 503(b)(2).

 

60  11 U.S.C. § 330(a)(1).

 

61  In re Bottone, 226 B.R. 290, 294–98 (Bankr. D. Mass. 1998) (After conversion from Chapter 7 to Chapter 13, counsel fees to the debtor’s Chapter 7 attorney are administrative expenses entitled to priority and full payment through the Chapter 13 plan. In Chapter 7 case, debtor hired counsel to represent the debtor in several adversary proceedings challenging discharge and dischargeability. After incurring substantial fees, debtor converted from Chapter 7 to Chapter 13. Chapter 7 counsel filed a motion to determine the status of the claim for Chapter 7 debtor’s attorneys’ fees and asserting that the collection of those fees was not subject to the automatic stay. The court first determined that § 348(d) “recharacterizes most postpetition preconversion debts as prepetition claims in the subsequent case.” It has no application to claims arising in a Chapter 7 case that is converted to Chapter 13. The Chapter 7 attorneys’ fees cannot be postpetition claims in the Chapter 13 case under § 1305 because § 348(b) “precludes characterizing the Legal Fee as a § 1305(a)(2) postpetition claim because, for the purposes of § 1305(a), the date of the order for relief in a case converted to Chapter 13 is not deemed to be the date of the case commencement, but rather the date of conversion.” The court acknowledged a split of authority as to whether Chapter 7 debtors’ attorneys are entitled to compensation from a Chapter 7 estate after the 1994 amendments to § 330(a). Adopting the “better view,” court concludes, “In light of the absence of any legislative history or comment . . . the omission of the debtor’s attorney from § 330(a) listing was inadvertent. . . . This Court continues to maintain that counsel to a Chapter 7 debtor is entitled to compensation from the estate as an administrative claimant to the extent the factors set forth in In re Pine Valley Machine, Inc., 172 B.R. 481, 487–89 (Bankr. D. Mass. 1994), are satisfied.” After conversion from Chapter 7 to Chapter 13, “[n]othing in § 330(a)(4)(B) excludes from its scope a claim for legal services rendered in the Chapter 7 case from which the Chapter 13 case was converted. And, nothing in § 330(a)(4)(B) conditions the allowance of such a claim by whether it would have been allowable in the prior Chapter 7 case. . . . [I]ncluding such a claim within the scope of § 330(a)(4)(B), and, therefore, requiring payments under the plan pursuant to § 1322(a)(2), resolves a number of theoretical and practical problems. . . . [T]his Court concludes and holds that, pursuant to the provisions of § 330(a)(4)(B), the claim of a debtor’s attorney for legal services rendered in a Chapter 7 case subsequently converted to Chapter 13 is an administrative priority claim in the Chapter 13 case which must be treated pursuant to the provisions of § 1322(a)(2).”).

 

62  __ U.S. __, 124 S. Ct. 1023, 157 L. Ed. 2d 1024 (2004).

 

63  11 U.S.C. § 330(a).

 

64  11 U.S.C. § 326(a).

 

65  In re Murphy, 272 B.R. 483, 485 (Bankr. D. Colo. 2002) (“Notwithstanding what might otherwise qualify as ‘reasonable compensation’ for a trustee under section 330(a), Chapter 7 trustee’s fees are limited by the plain language of section 326(a) to a percentage of moneys Chapter 7 trustees disburse, even in cases that convert to Chapter 13.” Chapter 7 trustee is awarded an administrative expense claim for reasonable reimbursable expenses incurred during the Chapter 7 case.).

 

66  In re Colburn, 231 B.R. 778, 782–86 (Bankr. D. Or. 1999) (Upon conversion, Chapter 7 trustee is entitled to compensation and counsel’s fees when trustee forced a no-asset Chapter 7 case to become a 100% payment Chapter 13 case. “[Section] 326(a) does not preclude Chapter 7 trustee compensation in cases that are . . . converted to Chapter 13 prior to completion of Chapter 7 administration. . . . [T]he Chapter 7 trustee is entitled to reasonable compensation and reimbursement for actual and necessary expenses under § 330(a), to be treated as an administrative expense. . . . [I]t would not be appropriate to approve compensation for Mitchell based upon applying the 326(a) percentages to a projected distribution to creditors. I will approve compensation . . . based upon the itemization of time . . . . Based upon the extraordinary results achieved in this particular case, I will approve compensation to [the trustee] at double the normal hourly rates . . . to be paid as an administrative expense pursuant to §§ 503(b)(2), 507(a)(1) and 1322(a)(2). . . . [C]ounsel for [the trustee] . . . is entitled to reasonable compensation for his services under § 330, to be treated as an administrative expense of the Chapter 13 case.”).

 

67  In re Rodriguez, 240 B.R. 912, 915–16 (Bankr. D. Colo. 1999) (“In order to encourage aggressive action by trustees, the reference to ‘trustee’ in the last sentence of section 326(a) must be read as a generic reference to the composite ‘trustee’ and to the aggregate distributions made in the case by the composite ‘trustee’ to all parties in interest other than the debtor. . . . Their aggregate fees, however, may not exceed the amount set by the cap under section 326(a). . . . In the case now before the Court, the composite ‘trustee’ will, if the chapter 13 plan is fully performed, disburse $5,329 to parties in interest. Her ten percent fee will be $532. Under section 326(a), then, the total amount to be disbursed ‘in the case by the trustee’ is also $5,329. Thus, the fee payable to the chapter 7 trustee is capped at 25 percent of the first $5,000 or less and 10% on any amount in excess of $5,000, which is $1,282.90. That amount is the maximum fee that can be paid to all of the trustees in the aggregate in this case. Because the chapter 13 trustee, by statute and by authorization of the U.S. Trustee, is authorized to receive $529 as compensation, the maximum compensation that can be paid to the chapter 7 trustee, Mr. Weinman, is $753.90 . . . . [I]n . . . chapter 13 . . . all administrative expenses of the ‘estate’ must be paid in full . . . . [T]here is no reason to prioritize the administrative expenses between chapters when the case is converted to chapter 13 . . . . Mr. Weinman will be entitled to receive from the chapter 13 estate an amount equal to 25 percent of each distribution until the allowed fee is paid in full.”).

 

68  In re Hages, 252 B.R. 789, 793–98 (Bankr. N.D. Cal. 2000) (Disagreeing in part with In re Rodriguez, 240 B.R. 912 (Bankr. D. Colo. 1999), “[t]his court agrees with the UST that distributions made through the chapter 13 plan should be imputed to the chapter 7 trustee, for purposes of calculating the chapter 7 trustee’s maximum fees. . . . Distributions can and should be imputed without having to resort to a single ‘composite’ trustee with combined fees for purposes of section 326(a). . . . [T]he chapter 7 trustee turns over an estate that must generate distributions to creditors under a chapter 13 plan that are equal to or greater than they will receive in Chapter 7. 11 U.S.C. § 1325(a)(4). Given these realities, it is entirely appropriate to impute the moneys that will be distributed by the chapter 13 trustee to the chapter 7 trustee for purposes of computing the maximum fee the chapter 7 trustee can charge, and allowing interim fees up to that maximum. . . . [T]he cases interpreting ‘moneys’ to mean cash or cash equivalents are distinguishable. . . . The UST urges this court to follow Rodriquez and view the chapter 7 trustee and chapter 13 trustee as a single ‘composite’ trustee. One problem with this reading is that it leads to a very odd result. . . . [T]he more value a chapter 7 trustee adds . . . the less the chapter 7 trustee can receive after conversion to chapter 13. A chapter 7 trustee who turns over substantial assets for distribution will receive nothing. . . . [T]he UST’s reading is contrary to the statutory scheme and the legislative history. . . . [T]his court favors reading ‘the case’ in section 326(c) to refer to the case ‘under chapter 7’ . . . consistent with the type of case previously referred to in section 326(a) and (b). This reading follows the ordinary canons of statutory construction. . . . [A]s this court reads section 326(c), it is not necessary to hold that conversion from chapter 7 to chapter 13 creates a new bankruptcy case.” Bankruptcy court allowed the Chapter 7 trustee fees as an administrative expense payable “pro rata and simultaneously” with other allowed expenses of administration in the Chapter 13 case.).

 

69  210 B.R. 538 (Bankr. N.D. Ohio 1997).

 

70  210 B.R. at 541 (Preconversion administrative claims are not controlled by § 726(b), leaving the court to “exercise reasonable discretion.” Using § 726 as a guideline, allowing preconversion trustee’s attorney’s fees as a “secondary § 507 administrative claim . . . accommodates all applicable provisions of the Code, including §§ 330, 348, 503(a), 507(b) and 1322.”).

 

71  In re Woodworth, 70 B.R. 361 (Bankr. N.D.N.Y. 1987).

 

72  75 B.R. 135 (Bankr. M.D. Fla. 1987).

 

73  Accord Schilling v. Kinslow, 287 B.R. 394, 395 (W.D. Ky. 2002) (“In a case that has been converted from Chapter 7 to Chapter 13 prior to liquidation of assets, the Chapter 7 trustee should be compensated on a quantum meruit basis ‘where the trustee performs substantial services that result in discovery of assets for the benefit of creditor.’ . . . [T]he correct analysis for determining compensation is found in 11 U.S.C. § 330(a)(3)(A-E). The statute specifically requires the court to look at the time spent on such services. . . . [W]ere a court to consider awarding a percentage based fee in this situation, it would still have to be based upon a reasonable amount of time expended and a reasonable rate.”). See also Schilling v. Moore, 286 B.R. 846 (W.D. Ky. 2002).

 

74  In re Wells, 87 B.R. 732 (Bankr. N.D. Ga. 1988). Accord In re Rakosi, 99 B.R. 47 (Bankr. S.D. Cal. 1989) (After conversion from Chapter 7 to Chapter 13, the law firm that represented Chapter 7 trustee is not entitled to any fees for services rendered after conversion. Section 503(b)(3)(D) is not available; unauthorized postconversion attorneys’ fees are not allowable as administrative expenses in the Chapter 13 case.).

 

75  See §§ 317.1 [ Exemptions at Conversion ] § 144.1  Exemptions at Conversion and 318.1 [ Lien Avoidance at Conversion ] § 144.2  Lien Avoidance at Conversion.

 

76  11 U.S.C. § 522(b)(2)(A).

 

77  11 U.S.C. § 348(a).

 

78  Marcus v. Zeman (In re Marcus), 1 F.3d 1050 (10th Cir. 1993).

 

79  See § 317.1 [ Exemptions at Conversion ] § 144.1  Exemptions at Conversion.

 

80  See above in this section, and see § 148.2  Absolute Right of Debtor? and § 148.4  Conversion to Chapter 13 after BAPCPA. See, e.g., In re Griggs, 181 B.R. 111, 114 (Bankr. N.D. Ala. 1994) (On a Chapter 7 debtor’s motion to convert to Chapter 13, eligibility is determined at the time of conversion because “[b]ut for a change in circumstances or a reevaluation of existing circumstances, no debtor would request a conversion of a case. Not to allow a court to consider the changed circumstances or to make its own reevaluation of existing circumstances would hamstring any review of such a request.”).

 

81  Lowe v. Sandoval (In re Sandoval), 103 F.3d 20, 23 (5th Cir. 1997). See § 317.1 [ Exemptions at Conversion ] § 144.1  Exemptions at Conversion.

 

82  See § 90.2  Exemption Issues and § 90.3  Exclusions and Exemptions after BAPCPA.

 

83  1 F.3d 1050 (10th Cir. 1993).

 

84  11 U.S.C. § 1325(a)(4). See discussion beginning at § 90.1  In General: Plan Payments vs. Hypothetical Liquidation.

 

85  11 U.S.C. § 348(f)(1)(A) and (f)(2), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 311, 108 Stat. 4106 (1994), discussed in § 143.2  In Cases Filed after October 22, 1994§ 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA§ 143.4  Priorities after Conversion: Two Trustees and a DSO§ 143.5  Bad-Faith Conversion and § 145.3  Lienholders’ Rights at Conversion under § 348(f) after BAPCPA.

 

86  See § 317.1 [ Exemptions at Conversion ] § 144.1  Exemptions at Conversion.

 

87  Section 348(f) could affect property of the estate and exemptions at reconversion of a Chapter 13 case. See § 150.1  Reconversion from Chapter 7 or Chapter 11 to Chapter 13 and § 150.2  Reconversion to Chapter 13 after BAPCPA.

 

88  See discussion beginning at § 158.1  Alimony, Maintenance or Support and § 159.1  Taxes.

 

89  136 B.R. 562 (D. Kan. 1992).

 

90  495 U.S. 552, 110 S. Ct. 2126, 109 L. Ed. 2d 588 (1990). See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4  Criminal Restitution and Criminal Fines.

 

91  See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4  Criminal Restitution and Criminal Fines.

 

92  Pub. L. No. 101-581, 104 Stat. 2865 (Nov. 15, 1990). See also Pub. L. No. 101-647, 104 Stat. 4789, 4916 (Nov. 29, 1990).

 

93  See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4  Criminal Restitution and Criminal Fines.

 

94  Section 4(b) of Pub. L. No. 101-581, 104 Stat. 2865 (Nov. 15, 1990) (emphasis added).

 

95  See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4  Criminal Restitution and Criminal Fines.

 

96  See 11 U.S.C. § 348(a) (conversion does not change the date of commencement of the bankruptcy case).

 

97  See, e.g., Franklin v. New Mexico, 730 F.2d 86 (10th Cir. 1984) (Unless Congress expressly provides otherwise, the law as of the petition date governs issues of discharge and dischargeability.); Martin v. Great Lakes Higher Educ. Corp. (In re Martin), 137 B.R. 770 (Bankr. W.D. Mo. 1992) (“[D]ischarge of a debt is determined by the law in effect at the time debtor files the petition.”); Ahrendt v. Waukesha County Social Servs. Dep’t (In re Ahrendt), 28 B.R. 329 (Bankr. E.D. Wis. 1983) (Because the single most important factor in a debtor’s decision whether to file bankruptcy is the scope of the discharge, the discharge law in effect at the petition is controlling.); Iowa Dep’t of Social Servs. v. Morris (In re Morris), 21 B.R. 816 (Bankr. N.D. Iowa 1982) (The date of the petition controls dischargeability because any other rule would frustrate a debtor’s “fresh start” and would be inconsistent with the reasonable expectations of creditors that dealt with the debtor after the filing of the petition.); In re Flamini, 19 B.R. 303 (Bankr. E.D. Mich. 1982) (Because the extent of the discharge is one of the most important things considered by a debtor before filing a bankruptcy case, a change in the extent of discharge is presumed to address the future only.); Board of Trustees v. Bruce (In re Bruce), 3 B.R. 77 (Bankr. N.D. Ill. 1980) (Filing date is key date for determining extent of discharge in bankruptcy cases.). See also United States v. Marxen, 307 U.S. 200, 207, 59 S. Ct. 811, 83 L. Ed. 1222 (1939) (“[T]he rights of creditors are fixed by the Bankruptcy Act as of the filing of the petition in bankruptcy.”).

 

98  See Department of Health & Welfare v. Reynolds (In re Reynolds), 726 F.2d 1420 (9th Cir. 1984) (Court generally should apply the law in effect at the time it renders its decision unless there is contrary indication in the statute or where retroactive application would result in “manifest injustice.” No manifest injustice would result in applying dischargeability law in effect at time of discharge when the change in the law between the petition and the time of discharge concerned the dischargeability of spousal and child support rights.); Commissioner of Admin. Servs. v. Spell (In re Spell), 650 F.2d 375 (2d Cir. 1981) (Applying the “traditional rule,” the grounds for discharge in bankruptcy are determined by the law in force at the time the judge determines the question of discharge.); In re Carter, 32 F.2d 186 (2d Cir. 1929) (The law to be applied in a nondischargeability action is the law in effect at the time of the debtor’s application for discharge.); Royal Indem. Co. v. Cooper, 26 F.2d 585 (4th Cir. 1928); Hudson County Welfare Dep’t v. Roedel (In re Roedel), 34 B.R. 689 (D.N.J. 1983), aff’d without opinion, 734 F.2d 5 (3d Cir. 1984) (Because a debtor in bankruptcy has no constitutional right to a discharge, the date a discharge is granted governs the scope of the discharge available to the debtor. “Since the right to a discharge is entirely a creation of statute, a debtor who has not yet received his discharge under the statute has no vested right in having the law remain as it was at the time he filed his petition.”); Kuehndorf v. Wisconsin (In re Kuehndorf), 24 B.R. 555 (W.D. Wis. 1982); In re Leach, 15 B.R. 1005 (Bankr. D. Conn. 1981); In re Johnson, 5 Bankr. Ct. Dec. (CRR) 532 (Bankr. E.D. Pa. 1979).

 

99  Section 3007(b) of Pub. L. No. 101-508, 104 Stat. 1388, at 1388-28 to 1388-29 (Nov. 5, 1990). See § 158.2  Student Loans and § 159.6  Student Loans: § 523(a)(8).

 

100  Section 3007(b)(2) of Pub. L. No. 101-508, 104 Stat. 1388-29 (Nov. 5, 1990).

 

101  Section 3008 of Pub. L. No. 101-508, 104 Stat. 1388-29 (Nov. 5, 1990).

 

102  So quietly that most of us were unaware of the repealer for several years.

 

103  See § 1558 of the Higher Education Act of 1992, Pub. L. No. 102-325, 106 Stat. 448 (July 23, 1992) (“Section 3008 of the Omnibus Reconciliation Act of 1990 is repealed.”).

 

104  See § 158.2  Student Loans and § 159.6  Student Loans: § 523(a)(8).

 

105  See § 150.1  Reconversion from Chapter 7 or Chapter 11 to Chapter 13 and § 150.2  Reconversion to Chapter 13 after BAPCPA.

 

106  See In re Rementer, 58 B.R. 723 (Bankr. D. Del. 1986) (After conversion from Chapter 7 to Chapter 13, farm debtor can be (re)converted to Chapter 7. Reconversion from Chapter 13 to a voluntary Chapter 7 case does not constitute a prohibited involuntary liquidation of a farm.).