Cite as: Keith M. Lundin, Lundin On Chapter 13, § 153.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
11 U.S.C. § 349 defines the effects of dismissal of a Chapter 13 case. Unless the court orders otherwise,1 dismissal does not bar the debtor’s discharge in a subsequent bankruptcy case. Dismissal does not prejudice the debtor with regard to the filing of a new petition, except as provided in 11 U.S.C. § 109(g).2 Dismissal reinstates any lien or transfer that was avoided during the Chapter 13 case, for example, under § 522(f),3 and dismissal revests property of the estate in the entity in which the property was vested immediately before commencement of the Chapter 13 case.4
Determining entitlement to money held by the Chapter 13 trustee at dismissal is somewhat less complicated than allocating the estate at conversion to Chapter 7.5 Some of the same interests are at issue. The debtor wants a return of all monies held by the Chapter 13 trustee or in the pipeline from an employer. The creditors in the Chapter 13 case want those funds distributed consistent with the plan or as adequate protection. The debtor’s attorney with an unpaid fee wants the money to pay administrative expenses.
Section 349(b)(3) changes the rights of all parties at dismissal: Property of the estate “revests . . . in the entity in which such property was vested immediately before the commencement of the case.”6 In what entity were the debtor’s future wages vested at the commencement of the Chapter 13 case? If “vested” in anyone, perhaps future wages were an expectancy of the debtor.
It is at least interesting that nowhere does the Bankruptcy Code provide that dismissal of a Chapter 13 case vacates an order of confirmation. This effect of dismissal is not revealed in § 349; it is not stated as a condition of dismissal in § 1307; and it is not suggested in the section of the Code dealing with revocation of an order of confirmation, 11 U.S.C. § 1330.7 At conversion, § 348(e) terminates the services of the Chapter 13 trustee. There is no similar provision in § 349, though it is discomforting to imagine that the Chapter 13 trustee continues to serve after dismissal. If dismissal of the Chapter 13 case does not vacate the order of confirmation, are the debtor and all creditors still bound by the plan under § 327(a)?8 The strategies suggested by this question are reason enough to reject the whole thought.
Nash v. Kester (In re Nash)9 and other cases10 hold that dismissal vacates the confirmation order without citation to any particular section of the Bankruptcy Code. In contrast to Nash, it has been held that funds in the possession of the Chapter 13 trustee at dismissal after confirmation are distributed to creditors consistent with the (vacated?) confirmed plan. As explained by the bankruptcy court in In re Parrish,11 this outcome elevates the requirement for distribution in § 1326(a)(2) over the termination of the Chapter 13 trustee in § 349(b), with a tip of the hat to § 349, which does not explicitly vacate the confirmation order:
[Section] 349(b) ought not be construed as terminating, at the moment of dismissal, the command of § 1326(a)(2) that the trustee distribute funds held under the confirmed plan in accordance with the plan. . . . When read in conjunction with § 1326(a)(2), § 349(b)(3) is unambiguous. It revests the debtor with the funds subject to whatever restrictions § 1326(a)(2) imposes. . . . Section 1326(a)(2) simply requires the trustee to make distributions of those funds according to the confirmed plan, both before and after dismissal, regardless of the entity in whom title is vested. Although § 349(b)(2) vacates certain orders, it does not list orders confirming chapter 13 plans as among the orders that a dismissal vacates. . . . The court disagrees with the [Nash v. Kester (In re Nash), 765 F.2d 1410 (9th Cir. 1985),] conclusion that a dismissal order effectively vacates an order of confirmation as to funds already paid under a confirmed plan.12
The revesting effect of dismissal under § 349(b)(3) has been injected with important content for lienholders. There is no analog at dismissal to the special conversion rules found in § 348(f).13 Although § 349(b) says nothing specific about the effect of dismissal on allowed secured claims, it has been held that dismissal reinstates a lien for the full amount of the debt notwithstanding payment of all or part of the allowed secured claim during the Chapter 13 case.
For example, in In re Booth,14 the confirmed plan provided, “[U]pon completion of payment of the secured portion of any claim, the property securing said claim shall vest in the debtor free and clear of any lien, claim or interest of a secured creditor.” A car lender filed a claim for $21,423.32. The bankruptcy court valued the car and allowed a secured claim of $15,750. The debtor paid the allowed secured portion in full through the confirmed plan. The Chapter 13 case was later dismissed. In a subsequent Chapter 7 case, the debtor defended a motion for relief from the stay filed by the car lender with the argument that the car lender’s lien was satisfied during the prior Chapter 13 case. The bankruptcy court held that the revesting of property at dismissal under § 349(b)(3) revived the car lender’s lien notwithstanding full payment consistent with the confirmed plan:
Section 349(b)(3) of the Code provides that in the absence of a contrary court order, the dismissal of a bankruptcy case “revests the property of the estate in the entity in which such property was vested immediately before the commencement of the [bankruptcy] case.” . . . [T]he order of confirmation . . . clearly [stated] that “[a]ll property of the estate, as specified by 11 U.S.C. Section 541 and 1306 shall remain property of the estate following confirmation.” . . . [R]evesting property of the estate . . . as required by § 349(b)(3) revived the lien (a property interest) that had been satisfied by payments under Booth’s plan. That lien, at the commencement of the case, was in the full amount owed by Booth to Wells Fargo’s predecessor, not limited to the value of the automobile. The satisfaction of the lien was possible only through the operation of the plan during the bankruptcy case; hence, the revesting of the property interest to its pre-bankruptcy state requires the revival of the lien. . . . [T]his result does not conflict with any general bankruptcy policy. . . [I]f a Chapter 13 debtor is allowed to make time payments of only the secured portion of a bifurcated claim, receive a release of the lien, and then dismiss the case without making any payment on the unsecured portion of the claim, the debtor will have obtained the economic equivalent of an installment redemption. It is not unreasonable that § 349(b)(3) should prevent that result.15
Booth fails to adequately respect the effects of confirmation of the plan under § 1327(a).16 The lienholder in Booth could have objected to confirmation but did not. That § 349(b)(3) revested the car in the debtor at dismissal does not explain why a lien that was satisfied consistent with the confirmed plan before dismissal was revived. Section 349(b)(3) speaks of the revesting of “property of the estate.” The lien was not property of the estate, it was property of the car lender.
Section 1326(a)(2) is relevant at dismissal.17 If a Chapter 13 case is dismissed before a plan is confirmed, § 1326(a)(2) requires the trustee to return to the debtor any payments made “after deducting any unpaid claim allowed under section 503(b) of this title.”18 Section 503(b) defines administrative expenses to include “the actual, necessary costs and expenses of preserving the estate,” taxes incurred by the estate and “compensation and reimbursement awarded under section 330(a).”19 In this context, claim in § 1326(a)(2) is reasonably interpreted to include administrative expenses allowed under § 503(b).20
The most common unpaid administrative expense at dismissal of a Chapter 13 case before confirmation is attorney fees for debtor’s counsel.21 Debtor’s counsel is entitled to compensation from the Chapter 13 estate under § 330(a), which compensation qualifies as an expense of administration under § 503(b) and is payable to counsel before refunding to the debtor under § 1326(a)(2).22 The debtor’s attorney and any other party requesting an administrative expense must act quickly to assert § 503(b) and § 1326(a)(2) to stop the trustee from returning the funds on hand to the debtor. Especially when dismissal is voluntary,23 notice of the debtor’s action is problematic,24 but a timely demand on the Chapter 13 trustee for payment of an administrative expense is essential else the trustee will routinely return the funds on hand to the debtor. Acknowledging that the Code and rules are silent with respect to the procedure for seeking an administrative expense at dismissal of a Chapter 13 case,25 one bankruptcy court stated generally that “a reasonable opportunity to urge administrative claims ought to be given to entities whose claims may have matured but not yet allowed—such as a Chapter 13 debtor’s attorney’s fees.”26
At dismissal before confirmation, §§ 329 and 330 and Bankruptcy Rule 2016 continue to apply: to be paid from money held by the Chapter 13 trustee, debtor’s counsel must amend any previously filed fee disclosure and make a request for payment of an administrative expense under §§ 1326(a)(2) and 503(b);27 the fees requested must be reasonable under the usual standards in § 330(a)(3)(A) and (4)(B).28 When an attorney retrieved $4,200 from the Chapter 13 trustee based on an agreement signed by the debtors before the petition, the bankruptcy court found that counsel violated the Code and Rules and “may properly be stripped of all fees.”29 It has been held that the debtors’ right to refund of payments held by the Chapter 13 trustee at dismissal before confirmation is superior to a state law attorney’s lien asserted by counsel who failed to make a fee application and does not have an allowed administrative expense under § 503.30 In one reported decision, the bankruptcy court refused an attorney’s motion to impound funds held by the trustee at dismissal before confirmation because it was “very unlikely” that counsel would be awarded more than the $1,575 already paid for the debtor’s fifth bankruptcy case in four years.31
In In re Agee,32 at dismissal before confirmation, on the debtor’s objection, the bankruptcy court found the fee request for $4,025 was “greatly in excess of fees normally awarded to attorneys for services in relatively uncomplicated consumer Chapter 13 cases, even where confirmation is obtained.33 In In re Phillips,34 debtor’s attorney was refused an administrative expense at dismissal before confirmation because counsel failed to prove benefit to the debtor for purposes of § 330(a)(4)(B).35 The Phillips court gave the following account of what a debtor’s attorney must prove to be entitled to fees in a Chapter 13 case dismissed before confirmation:
To justify more than a nominal fee, counsel must provide evidence of valuable professional efforts to investigate and to evaluate the facts, valuable professional efforts to assess the prospects for confirming a chapter 13 plan, valuable professional efforts to confirm a chapter 13 plan, valuable professional client counseling concerning the debtor’s postpetition duties and responsibilities, and a reasonable belief that a plan could be confirmed and consummated.36
The bankruptcy court in In re Lampman,37 searched the Bankruptcy Code for guidance when the Chapter 13 case was dismissed after confirmation and attorney’s fees were unpaid. At dismissal before confirmation, § 1326(a)(2) provides that administrative expenses—such as attorneys’ fees—allowed under § 503(b) are deducted from funds held by the Chapter 13 trustee before the balance is returned to the debtor. There is no similar provision in § 1326 or elsewhere with respect to payment of administrative expenses at dismissal after confirmation. Not unreasonably, the bankruptcy court in Lampman extended the rights of debtor’s counsel to include payment of fees from funds held by the Chapter 13 trustee at dismissal after confirmation:
A technical reading of section 349 and section 1326(a)(2) could lead to the odd conclusion that administrative expenses get paid out of funds on hand upon a voluntary dismissal only if a plan has not been confirmed. . . . That could mean that, if a plan has been confirmed, then administrative expenses do not get paid out of any funds on hand with the chapter 13 trustee upon voluntary dismissal. That seems an anomalous and unfair outcome. . . . [T]here is ready escape available in the statute itself, which states that the court may, for cause, order a different revesting or distribution than as provided in the statute. . . . To achieve the sensible ends suggested both by [§ 349 and by] section 1326(a)(2), to wit, the payment of allowed administrative claims out of funds on hand upon voluntary dismissal, the court here holds that, on motion of the debtor requesting payment of attorney fees previously allowed in a chapter 13 case, the court will order that such fees be deducted from the funds on hand and paid over to the attorney in question.38
One bankruptcy court has assigned debtors’ counsel an affirmative obligation to explain to the debtor the potential conflict of interest between the debtor and counsel at dismissal before confirmation. As described by the bankruptcy court in In re Haskew:39
[B]y virtue of the debtors’ right to all funds on hand except to the extent § 503(b) expenses are allowed, they are truly adverse to any administrative expense applicant, including the trustee or their own attorney. The practical dynamics created by § 1326(a)(2) require the applicant to give clear notice to the debtor of the relief sought and the nature of the impact on the debtor’s interest. . . . [A] debtor’s attorney seeking compensation in a dismissed chapter 13 case and payment from a Trustee under § 1326(a)(2) must do more than simply send a copy of a form fee application to his client. The debtor has no one, save the attorney he or she has hired, who can (and should) advise them how § 1326(a)(2) works.40
Attorneys are not the only entities that might be entitled to an administrative expense at dismissal before confirmation. In In re Epling,41 the plan proposed to create a utility deposit through payments to the Chapter 13 trustee.42 To protect the utility supplier from the possibility of dismissal before confirmation, the bankruptcy court required the plan to also include a provision that the utility would be entitled to an administrative expense under § 503(b)(1)(A):
Subsection (a)(2) of § 1326 . . . permits the trustee, in the unconfirmed situation, to deduct any unpaid claim allowed under § 503(b). The Court believes that Columbia would have a valid objection to any chapter 13 case in which the plan is not confirmed if the plan language fails to provide for the allowance under § 503(b)(1)(A) of any properly claimed utility deposit. Perhaps such protection should routinely be inserted into plan “utility provisions.”43
Typically without discussion, several reported cases allow the payment of the Chapter 13 trustee’s percentage fee from the money held by the trustee at dismissal before confirmation notwithstanding that such fees are not administrative expenses under § 503(b).44 In an unpublished opinion, the Bankruptcy Appellate Panel for the Tenth Circuit has held that the fees and expenses of the standing Chapter 13 trustee are not administrative expenses under § 503(b) and cannot be collected at dismissal before confirmation.45 The Tenth Circuit BAP reasons that the requirement in § 1326(a)(2) that the trustee “retain” payments from the debtor until confirmation or dismissal and the permissive power in § 1326(b) that trustee’s fees can be paid “before or at the time of each payment to creditors under the plan” both fully operate only if the fees and expenses of a standing trustee are not paid until confirmation releases the trustee from the retention obligation in § 1326(a)(2).46
If a plan was confirmed, the requirement in § 1326(a)(2) that the trustee distribute any payments received from the debtor in accordance with the plan collides at dismissal with the revesting of property of the estate under § 349(b)(3). The U.S. Court of Appeals for the Ninth Circuit, in Nash held that money paid to the Chapter 13 trustee, whether received before or after dismissal, belonged to the debtor upon dismissal and should not be distributed as provided by a confirmed plan. The Ninth Circuit reasoned that voluntary dismissal instantly vacates the confirmed plan and relieves the Chapter 13 trustee of authority to make payments under the plan. The Chapter 13 trustee was surcharged for return of funds distributed to creditors after dismissal. The court did not address whether administrative expenses in the Chapter 13 case could be collected from those funds before return to the debtor.
The revesting effect of dismissal under § 349(b)(3) can be overcome if the bankruptcy court “for cause, orders otherwise.”47 There will be circumstances when creditors or the holders of administrative expenses prefer that the court retain control over property of the Chapter 13 estate at dismissal. For example, in In re Torres,48 somebody dropped the ball, and eight months passed between confirmation and the submission of a confirmation order. In the meantime, the plan fell apart, and dismissal occurred almost simultaneously with entry of the confirmation order. The bankruptcy court observed that normally at dismissal funds held by the Chapter 13 trustee revest in the debtor under § 349(b)(3). But finding “the rights of creditors should be paramount,” the court ordered the trustee to distribute the accumulated payments consistent with the confirmation order.
Similarly, in In re DeLuca,49 at dismissal, the Chapter 13 trustee held $4,000 paid by the debtor before confirmation. The debtor’s attorneys filed a request for payment of administrative expenses to recover fees from the $4,000. The debtor also owed taxes in excess of $22,000. The IRS served a levy on the Chapter 13 trustee to grab the $4,000. The IRS argued that at dismissal § 349(b)(3) revested the $4,000 in the debtor; thus, the IRS levy defeated the claims of the debtor’s attorneys. The court ruled for debtor’s counsel, finding that the court retained jurisdiction over the money held by the Chapter 13 trustee at dismissal in order to rule on the pending fee applications.
Levies by creditors on the Chapter 13 trustee at dismissal have tested the revesting effect of § 349(b)(3) and the directive in § 1326(a)(2) that the trustee return payments to the debtor in an unconfirmed case. In Beam v. IRS (In re Beam),50 the Chapter 13 case was filed in January of 1993 and confirmation was denied in June of 1997.51 During the intervening years, the debtors deposited $24,000 with the trustee toward the proposed plan. After confirmation was denied, the debtors voluntarily dismissed the Chapter 13 case. The IRS immediately served a notice of levy on the Chapter 13 trustee. The U.S. Court of Appeals for the Ninth Circuit concluded that the IRS levy was effective to defeat the debtor’s right to a refund under § 1326(a)(2):
Congress clearly intended to exclude from IRS levy only those 13 categories of property specifically-exempted in [26 U.S.C.] § 6334(a). . . . Section 1326(a)(2) of the Bankruptcy Code is not listed among the 13 items exempt from levy under § 6334(a). . . . Because a trustee in bankruptcy represents the bankruptcy estate, see 11 U.S.C. § 323, the trustee is therefore obligated to the estate. Accordingly, service of a notice of levy upon the trustee in bankruptcy for any obligations owed by the estate is proper.52
On slightly different logic, other reported decisions uphold levies by state taxing authorities and other creditors at dismissal before confirmation, typically first allowing the deduction of administrative expenses consistent with § 1326(a)(2).53 One bankruptcy court concluded to the contrary that § 1326(a)(2) mandates return to the debtor of all funds on hand at dismissal before confirmation, net of administrative expenses and creditors must assert their state law remedies against the debtor, not by garnishment of the Chapter 13 trustee.54 When dismissal occurs after confirmation, § 1326(a)(2) does not apply, and it has been held that a levy on the Chapter 13 trustee is effective notwithstanding a routine court order that would otherwise return the funds on hand to the debtor.55
An unpublished opinion from the Bankruptcy Appellate Panel for the Tenth Circuit considers the contest between a swift debtor’s attorney and a slightly slower creditor vying for funds held by the Chapter 13 trustee at dismissal. Lee County State Bank v. Unis Public Schools (In re Sims)56 started out as a common fact pattern: debtor made payments to the Chapter 13 trustee for a few months, but case was dismissed before confirmation; debtor’s attorney was unpaid at dismissal. The twist in Sims came a few days after dismissal when the debtor executed an assignment of rights in the funds held by the Chapter 13 trustee to the law firm that represented the debtor in the Chapter 13 case. Two weeks later a creditor served a writ of garnishment on the Chapter 13 trustee, seeking the same funds. Applying state law, the Bankruptcy Appellate Panel for the Tenth Circuit concluded that the assignment of rights “constituted an absolute unconditional assignment of debtor’s rights to the funds.”57 Accordingly, the race went to the swift: the debtor’s attorney defeated the subsequent garnishing creditor. Chapter 13 attorneys everywhere should take a lesson.
Depending on your perspective, In re Barrett58 is the best or the worst imaginable application of § 1326(a)(2) at dismissal of a Chapter 13 case. The Chapter 13 case in Barrett was filed in 1988. It was the debtor’s third Chapter 13 case. Notwithstanding evidence of misconduct by the debtor during the prior cases, the bankruptcy court dismissed the bank’s adversary proceeding seeking sanctions and dismissal for bad faith. The proposed plan required the debtor to make monthly payments to the trustee of $565 and to pay a continuing monthly mortgage payment directly to the bank.
The bank appealed dismissal of the adversary proceeding. During the four-year appellate process, the debtor paid more than $25,000 to the Chapter 13 trustee. However, the debtor failed to pay or to save the regular monthly mortgage payments that were supposed to be paid directly to the bank. For strategic reasons, the bank neither moved for relief from the stay nor sought adequate protection during the appeal.
In 1992, the U.S. Court of Appeals for the Sixth Circuit affirmed dismissal of the adversary proceeding and remanded the case to the bankruptcy court.59 When the case reappeared before the bankruptcy court, the Chapter 13 trustee was holding more than $25,000 paid by the debtor, but there was a postpetition default to the bank of more than $20,000. The debtor was unable to propose a feasible plan, and the bankruptcy court dismissed the case. A great battle ensued over the $25,000 held by the Chapter 13 trustee.
Citing § 1326(a)(2), the bankruptcy court concluded that the $25,000 belonged to the debtor. The bank’s argument that it was entitled to the money as “adequate protection” failed because it had not made a demand for adequate protection, and United Savings Ass’n of Texas v. Timbers of Inwood Forest Associates, Ltd.,60 precluded recovery of the unpaid mortgage installments absent evidence that the collateral had declined in value. The bank’s argument for an administrative claim for taxes and insurance payments it made during the Chapter 13 case was rejected because the property was undersecured and payments for taxes and insurance benefited the bank as a lienholder, not the estate or the debtor.61
One message for creditors in Barrett is: Any creditor that hopes to share the funds on hand at dismissal before confirmation must be positioned to prove its entitlement to an administrative expense under § 503(b). Section 1326(a)(2) is a powerful adjunct to the congressional intent that consumer debtors are encouraged to attempt repayment through a Chapter 13 plan, without penalties for failure.
Dismissal of a Chapter 13 case terminates the automatic stay.62 In contrast to an order for relief from the stay,63 after the 1999 amendments to Bankruptcy Rule 7062, there is no stay of the effectiveness of an order dismissing a Chapter 13 case—upon dismissal, the automatic stay instantaneously stops protecting the debtor or assets from collection efforts of creditors.64 Dismissal does not validate actions taken in violation of the automatic stay prior to dismissal.65 Dismissal does not abate an action for sanctions for violation of the stay while the case was pending,66 nor does it defeat bankruptcy court jurisdiction to annul the stay to validate some earlier action by a creditor.67
Although there is discretion under § 349 to order otherwise, dismissal reverses the effects of orders entered during the case fixing the amounts of claims, valuing collateral and avoiding preferences and fraudulent conveyances.68 In In re Sadler,69 the U.S. Court of Appeals for the Seventh Circuit refused to “order otherwise” under § 349 when, after dismissal of a Chapter 13 case and refiling under Chapter 12, the debtor sought to use § 349 to preserve preferences that were recovered in the Chapter 13 case. The Seventh Circuit found that the dismissal-refiling maneuver was designed to preserve for the debtor personally preferences recovered in the prior Chapter 13 case, without benefit to creditors.
Chapter 13 cases are often filed to interrupt a prepetition foreclosure on real property. Notwithstanding that the confirmed plan cures default and maintains payments on a home mortgage, at dismissal before completion of payment, it has been held that the property returns to its status in foreclosure at the time of the petition.70 Dismissal of the Chapter 13 case may divest the bankruptcy court of jurisdiction to order a mortgage holder to re-notice it’s pending foreclosure sale.71 Failure to seek a stay pending appeal of an order dismissing a Chapter 13 case can be fatal to the appeal when a foreclosure sale is immediately completed.72
Dismissal does not necessarily permit the debtor to escape misconduct during the Chapter 13 case. For example, in Wesley Medical Center v. Wallace,73 the bankruptcy court retained jurisdiction after dismissal to punish the debtor with contempt for making personal use of funds recovered during the Chapter 13 case.
Chapter 13 debtors have been prevented from using the passage of time during the Chapter 13 case to defeat the rights of creditors after dismissal. For example, even before the Supreme Court resolved the issue,74 many reported decisions refused to count the time spent in a Chapter 13 case toward the three-year reach-back for the nondischargeability of taxes in § 523(a)(1)(A).75 Dismissal of a Chapter 13 case causes interest that accrued but was not allowable in the prior case to become allowable if the debtor refiles.76
Ironically, dismissal can be both a prerequisite and an obstacle to appellate review of decisions during the Chapter 13 case. Discussed above,77many courts have held that a Chapter 13 debtor must suffer dismissal of the case before an order denying confirmation is reviewable on appeal. On the other hand, it has been held that dismissal renders moot the appeal of some issues decided earlier in the Chapter 13 case.
For example, in IRS v. Pattullo (In re Pattullo),78 the bankruptcy court determined that the debtor was within the dollar limits for eligibility based on a stipulation between the debtor and the IRS. The IRS appealed that eligibility decision to the district court (which affirmed) and then to the Ninth Circuit. While under submission in the Ninth Circuit, the Chapter 13 case was dismissed by the bankruptcy court. Uninformed of this dismissal, the Ninth Circuit affirmed that the debtor was eligible. The IRS then moved to dismiss the appeal before the Ninth Circuit based on mootness and moved to vacate the Ninth Circuit’s decision that the debtor was eligible.
The Ninth Circuit held that dismissal of the Chapter 13 case rendered moot the appeal of the bankruptcy court’s eligibility decision, notwithstanding that the debtor filed a new Chapter 13 case immediately after dismissal presenting the same eligibility question with respect to the IRS claim. The Ninth Circuit then held that vacatur of its eligibility decision was appropriate under Arizonans for Official English v. Arizona,79 because mootness resulted from the unilateral action of the party that prevailed below.
Other courts have held that dismissal of the Chapter 13 case moots the debtor’s appeal of an order denying hardship discharge80 and the appeal of an order denying the debtor’s objection to a claim.81 Filing a new bankruptcy case during the appeal of dismissal of a prior Chapter 13 case can moot the appeal. For example, in In re Mendy,82 the debtor appealed dismissal of the Chapter 13 case and during the appeal filed a new Chapter 11 case. Before the district court could decide the appeal of the dismissal of the Chapter 13 case, the Chapter 11 case was converted to Chapter 7. The district court concluded that the appeal of issues unique to the Chapter 13 case was rendered moot by conversion of the Chapter 11 case to Chapter 7.
On the third hand, dismissal does not necessarily prevent preclusion in subsequent litigation based on decisions during the Chapter 13 case. For example, in Arneson v. Farmers Insurance Exchange (In re Arneson),83 the Chapter 13 case was filed after an insurance company took a subrogation judgment against the debtor for injuries the debtor inflicted while driving drunk. In the Chapter 13 case, the insurance company filed an adversary proceeding and obtained a judgment that its debt was not dischargeable under § 523(a)(9).84 The debtor appealed to the district court (which affirmed) and then to the Ninth Circuit.
While the dischargeability appeal was pending before the Ninth Circuit, the Chapter 13 case was dismissed by the bankruptcy court because the debtor stopped making payments. No one notified the Ninth Circuit (sound familiar?), and the appeal was eventually dismissed for failure to prosecute.
A few months later, the debtor filed a Chapter 7 case. The insurance company sought to enforce the judgment declared nondischargeable in the prior Chapter 13 case. The debtor argued that the bankruptcy court’s nondischargeability determination was not entitled to preclusive effect because his appeal was undecided when the Chapter 13 case was dismissed and thus the judgment of nondischargeability should have been vacated.
The Bankruptcy Appellate Panel for the Ninth Circuit found the debtor’s argument “more heroic than rational.”85 Because dismissal of the Chapter 13 case occurred when the debtor stopped making payments, the prior appeal failed because of the debtor’s actions and vacatur for mootness was not appropriate. Noting that nothing in § 349 automatically vacated a judgment of nondischargeability entered during the Chapter 13 case, the § 523(a)(9) judgment was entitled to preclusive effect in the subsequent Chapter 7 case.
Appealing dismissal of a Chapter 13 case is subject to the usual rules for appeal under Part VIII of the bankruptcy rules. For example, when the debtor files a notice of appeal after an oral order dismissing the Chapter 13 case, under Bankruptcy Rule 8002(a) the notice of appeal is effective as if filed on the day the written order of dismissal was subsequently entered.86
The dismissal of a Chapter 13 case does not necessarily defeat bankruptcy court jurisdiction over adversary proceedings brought by or against the debtor.87 But when bankruptcy court jurisdiction depends on the existence of a bankruptcy estate or the bankruptcy court acquired jurisdiction in the first instance by removal, dismissal of the Chapter 13 case can divest the bankruptcy court of further jurisdiction over the subject matter or the parties.88
In a community property state, when one spouse filed a Chapter 7 case and the other spouse filed a Chapter 13 case, upon dismissal of the Chapter 13 case, it was held that all community property passed into the remaining Chapter 7 estate.89
1 See § 339.1 [ Court-Imposed Conditions and Restrictions on Dismissal ] § 153.3 Court-Imposed Conditions and Restrictions on Dismissal. See also § 20.1 [ Court-Imposed Restrictions on Eligibility to Refile ] § 24.1 Court-Imposed Restrictions on Eligibility to Refile.
2 11 U.S.C. § 349(a). As discussed in § 153.3 Court-Imposed Conditions and Restrictions on Dismissal, there is disagreement whether § 349(a) permits a bankruptcy court to condition the dismissal of a Chapter 13 case with respect to refiling, except as provided in § 109(g). See also discussion beginning at § 24.1 Court-Imposed Restrictions on Eligibility to Refile.
3 See discussion beginning at § 49.1 Available in Chapter 13 Cases.
4 See In re Beeman, 268 B.R. 268 (Bankr. D. Kan. 2001) (At dismissal, § 349(b) revested possession of pickup truck and trailer in creditor to whom property was pledged at the petition; order during Chapter 13 case returned possession to the debtor but preserved pledgee’s possessory lien rights.); In re Groves, 27 B.R. 866 (Bankr. D. Kan. 1983).
5 See discussion beginning at § 143.1 In Cases Filed before October 22, 1994.
6 11 U.S.C. § 349(b)(3). See In re Ullrich, 186 B.R. 747 (Bankr. M.D. Fla. 1995) (Tax lien filed in violation of the automatic stay in a Chapter 13 case is void in a subsequent Chapter 11 case. Section 349(b)(3) revested property of the estate in the debtor at dismissal of the Chapter 13 case—property was not then encumbered by the subsequently filed “void” notice of lien.). Compare Shell Oil Co. v. Capital Fin. Servs., 170 B.R. 903, 906 (S.D. Tex. 1994) (Assessments and liens imposed by the IRS during a Chapter 13 case in violation of the stay are effective upon dismissal. “The dismissal of the case revested all of the property in Gibson leaving the IRS free to enforce its liens. Liens that violate the automatic stay are voidable . . . but they are not automatically void. . . . When a bankruptcy case is dismissed, the property of the estate revests in the entity that held the property immediately before the case began. 11 U.S.C. § 349(b)(3). . . . If the automatic stay was in effect when the IRS filed its lien against Gibson [August 1989], the dismissal of the bankruptcy case [in April of 1992] terminated the stay. . . . Since the trustee of Gibson’s bankruptcy estate never avoided the IRS lien, the dismissal . . . voids the stay, and voids it from its inception. Gibson’s funds . . . are covered by the IRS’s lien.”).
7 See § 224.1 [ Revocation of Confirmation ] § 117.3 Revocation of Confirmation.
8 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 for discussion of the binding effect of confirmation under § 1327(a).
9 765 F.2d 1410 (9th Cir. 1985).
10 See, e.g., Elliott v. ITT Corp., 150 B.R. 36, 40 (N.D. Ill. 1992) (In dicta, “once a debtor dismisses the action, the confirmation of the plan is vacated and without res judicata effect. . . . Here, [the debtors] voluntarily dismissed their second Chapter 13 plan. Accordingly, it no longer had any binding effect on either party and had no further res judicata effect.”).
11 275 B.R. 424 (Bankr. D.D.C. 2002).
12 275 B.R. at 426–33.
13 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 and § 145.2 In Cases Filed after October 22, 1994 for discussion of the 1994 amendment to § 348(f).
14 289 B.R. 665 (Bankr. N.D. Ill. 2003).
15 289 B.R. at 668–70.
16 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 for discussion of the binding effect of confirmation under § 1327(a).
17 See also § 44.4 Consequences of Failure to Commence Payments, § 44.5 Return of Payments to Debtor, § 142.5 On Postpetition Claims, § 143.1 In Cases Filed before October 22, 1994, § 143.2 In Cases Filed after October 22, 1994 and § 143.3 Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA.
18 11 U.S.C. § 1326(a)(2). See, e.g., In re Clifford, 182 B.R. 229, 231 (Bankr. N.D. Ill. 1995) (At dismissal before confirmation, § 1326(a)(2) requires Chapter 13 trustee to return $23,900 paid by the debtor; however, Department of Revenue’s notice of levy served upon trustee after dismissal but before disbursement is effective and follows the money into the hands of the debtor. “[R]eading the plain, unambiguous language of section 1326(a)(2) . . . mandates that the Trustee turn over all of the subject funds to the Debtor. . . . The fact that [the Illinois Department of Revenue] levied on those funds while in the Trustee’s possession does not relieve the Trustee from the mandatory language of section 1326(a)(2). The Trustee can satisfy both statutes with a return of the funds to the Debtor, subject to IDOR’s lien created by the levy thereon. Such lien follows the funds into the hands of the Debtor.”).
19 11 U.S.C. § 503(b)(1), (2).
20 See §§ 99.1 [ What Claims Are Priority Claims? ] § 73.2 What Claims Are Priority Claims? and 291.1 [ Treatment of Priority Claims ] § 136.1 Treatment of Priority Claims. See also § 314.1 [ On Postpetition Claims ] § 142.5 On Postpetition Claims.
22 In re Hall, 296 B.R. 707 (Bankr. E.D. Va. 2002).
23 See § 329.1 [ Procedure, Timing and Form ] § 151.1 Procedure, Timing and Form.
25 In contrast, at conversion from Chapter 13 to Chapter 7, Bankruptcy Rule 1019(6) defines “timely” for filing requests for payment of administrative expenses. See § 137.1 Postpetition Claims before BAPCPA, § 137.2 Postpetition Claims after BAPCPA and § 142.5 On Postpetition Claims.
26 In re Lampman, 276 B.R. 182, 184–85 (Bankr. W.D. Tex. 2002).
27 In re Marin, 256 B.R. 503 (Bankr. D. Colo. 2000).
29 256 B.R. at 507.
30 In re Harris, 258 B.R. 8, 13–14 (Bankr. D. Idaho 2000) (At dismissal before confirmation, debtor’s counsel is not entitled to funds held by the Chapter 13 trustee because counsel did not make a fee application and has not been allowed an administrative expense under § 503; counsel’s assertion of a state law attorney’s lien fails because the fund of money held by the trustee was created by the debtor’s postpetition wages and did not come into existence by the efforts of counsel. Debtor’s counsel filed a Bankruptcy Rule 2016(b) disclosure at the beginning of the Chapter 13 case but never made a separate fee application or a request for payment of an administrative expense. The case was dismissed before confirmation, and the trustee was holding $1,000 paid in by the debtor. After dismissal, debtor’s counsel filed a “claim of lien.” The debtor sent a letter requesting that the trustee disburse the funds on hand to debtor’s counsel. Citing Beam v. IRS (In re Beam), 192 F.3d 941 (9th Cir. 1999), and In re Doherty, 229 B.R. 461 (Bankr. E.D. Wash. 1999), for the proposition that some creditors can assert liens on the funds held by the Chapter 13 trustee at dismissal, the bankruptcy court found that no state law lien asserted by debtor’s counsel was valid on the facts: “Here, while it is true that plan payments would not have been made to Trustee without the efforts of Counsel in commencement and prosecution of the Chapter 13 case, the actual funds did not come into existence due to the efforts of Counsel. The funds were part of Debtor’s income. With no fund created by the efforts of Counsel, the Court doubts the validity of Counsel’s alleged lien. . . . Section 1326(a)(2) imposes an affirmative duty on the trustee with respect to the funds. If Counsel desires to be paid from the money held by Trustee, he should apply for allowance of his fees in the manner prescribed by the Code. . . . [W]ith no administrative claims pending, Trustee is obligated by law to disburse the funds to Debtor.”).
31 In re Collida, 270 B.R. 209 (Bankr. S.D. Tex. 2001).
32 273 B.R. 149 (Bankr. S.D. Ohio 2001).
33 273 B.R. at 151.
34 291 B.R. 72 (Bankr. S.D. Tex. 2003).
36 291 B.R. at 83.
37 276 B.R. 182 (Bankr. W.D. Tex. 2002).
38 276 B.R. at 184–85.
39 No. 00-20792, 2001 WL 589043 (Bankr. D. Idaho May 18, 2001) (unpublished).
40 2001 WL 589043, at *3.
41 255 B.R. 549 (Bankr. S.D. Ohio 2000).
43 255 B.R. at 553.
44 See § 136.4 Trustee’s Fees and Expenses before BAPCPA, § 136.5 Trustees’ Fees and Expenses after BAPCPA and discussion beginning at § 143.1 In Cases Filed before October 22, 1994. See, e.g., In re Doherty, 229 B.R. 461 (Bankr. E.D. Wash. 1999) (At dismissal before confirmation, the Chapter 13 trustee is authorized to deduct $516 for administrative expenses of the trustee before remitting the balance to the State of Washington Department of Revenue pursuant to a levy.).
45 Skehen v. Miranda (In re Miranda), Nos. NM 01-044 to 048, 2001 WL 1538003 (B.A.P. 10th Cir. Dec. 4, 2001) (unpublished).
46 See also § 54.9 Compensation When Case Is Dismissed or Converted before Confirmation, § 136.4 Trustee’s Fees and Expenses before BAPCPA, § 136.5 Trustees’ Fees and Expenses after BAPCPA, § 143.2 In Cases Filed after October 22, 1994, § 143.3 Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA and § 143.4 Priorities after Conversion: Two Trustees and a DSO.
47 11 U.S.C. § 349(b).
48 No. 99-02609, 2000 WL 1515170 (Bankr. D. Idaho Oct. 10, 2000) (unpublished).
49 142 B.R. 687 (Bankr. D.N.J. 1992).
50 192 F.3d 941 (9th Cir. 1999).
51 It is not coincidence that a long hiatus between filing and confirmation produces odd problems in Chapter 13 practice. See also In re Barrett, 149 B.R. 494 (Bankr. N.D. Ohio 1993), discussed immediately below in the text. Reaching confirmation quickly is the best preventative for many problems in Chapter 13 practice. See § 115.1 Timing of Hearing on Confirmation before BAPCPA and § 115.2 Timing of Hearing on Confirmation after BAPCPA.
52 192 F.3d at 944–45. Accord In re Roberts, No. 01-14849-13, 2002 WL 1770767 (Bankr. S.D. Ala. June 18, 2002) (unpublished) (Chapter 13 trustee must honor IRS’s levy served after dismissal but before returning funds to the debtor in an unconfirmed case.); In re Brown, 280 B.R. 231, 234 (Bankr. E.D. Wis. 2002) (IRS lien trumps debtor’s right to funds held by Chapter 13 trustee at dismissal. “The IRS had a valid prepetition lien on all nonexempt property of the debtor, including the debtor’s funds in possession of the trustee, and the lien followed those funds when they were transferred to the Clerk of the Bankruptcy Court. As the [Beam v. IRS (In re Beam), 192 F.3d 941 (9th Cir. 1999),] court found, the IRS’ lien and levy superceded the debtor’s right to return of the funds under 11 U.S.C. § 1326(a)(2). . . . Just as the trustee in Beam was required to honor the IRS levy, the Clerk of Bankruptcy Court is likewise required to honor the IRS’ claim to the funds on which it has a lien.”); In re Schlapper, 195 B.R. 805, 806 (Bankr. M.D. Fla. 1996) (After entry of order of dismissal, IRS levy on funds held by the Chapter 13 trustee is effective, and the balance after payment of administrative expenses is not repaid to the debtor. IRS served 26 U.S.C. § 6331 notices of levy on the Chapter 13 trustee. Debtor was due a refund from the standing trustee of $12,424.30. “[O]nce the order of dismissal is entered and the stay has been lifted, and the Trustee has been ordered to turn over funds to the Debtor, [the trustee] becomes a debtor of the Debtor to that extent. The funds held by the Trustee are subject to levy or garnishment by creditors of the Debtor, pursuant to applicable law. The Trustee is bound to accept the levy if she has any money that belongs to the Debtor.”).
53 See In re Doherty, 229 B.R. 461, 463–67 (Bankr. E.D. Wash. 1999) (At dismissal before confirmation, levy on Chapter 13 trustee by state of Washington to collect prepetition taxes is effective; after deduction of $516 for administrative expenses, trustee must remit balance of $9,330 to Department of Revenue. “Section 349(b)(3) provides that upon dismissal property of the estate revests in the entity which held the property prior to commencement of the case. . . . The disposition of post-petition funds received by the Chapter 13 Trustee is addressed in 11 U.S.C. § 1326(a)(2). This section directs that post-petition payments be returned to the debtor if the case is dismissed prior to confirmation. . . . While it is clear that the funds at issue in this case revest in the Debtors upon dismissal, the Chapter 13 Trustee must complete his administration of the case before the funds can be returned to the Debtors. . . . The Court cannot permit the State’s levy to interfere with the accomplishment of the Trustee’s duties to determine and pay costs of administration. Those statutory duties are preemptive both under the Supremacy Clause of the United States Constitution and the doctrine of Custodia Legis. . . . The automatic stay provision[s] of § 362 . . . terminate upon the dismissal of the case. . . . [Section] 1326(a)(2) does not clearly extend those protections. . . . [T]he Trustee is authorized and entitled to deduct from the funds held the sum of $516.00 for administrative expenses. After deduction of this amount, the remaining funds are subject to the Department of Revenue’s Notice and Order to Withhold and Deliver.”); In re Clifford, 182 B.R. 229, 231 (Bankr. N.D. Ill. 1995) (At dismissal before confirmation, § 1326(a)(2) requires Chapter 13 trustee to return $23,900 paid by the debtor; however, Department of Revenue’s notice of levy served upon trustee after dismissal but before disbursement is effective and follows the money into the hands of the debtor. “[R]eading the plain, unambiguous language of section 1326(a)(2), . . . mandates that the Trustee turn over all of the subject funds to the Debtor. . . . The fact that [the Illinois Department of Revenue] levied on those funds while in the Trustee’s possession does not relieve the Trustee from the mandatory language of section 1326(a)(2). The Trustee can satisfy both statutes with a return of the funds to the Debtor, subject to IDOR’s lien created by the levy thereon. Such lien follows the funds into the hands of the Debtor.”).
54 In re Oliver, 222 B.R. 272, 274–75 (Bankr. E.D. Va. 1998) (At dismissal before confirmation, Chapter 13 trustee must return to the debtor funds on hand net of administrative expenses for debtor’s attorney’s fees and expenses; state court garnishment does not trump § 1326(a)(2). At dismissal before confirmation, Chapter 13 trustee was holding $10,876.04 paid by the debtor. The order of dismissal simultaneously granted debtor’s counsel attorney’s fees and expense reimbursement. After the order of dismissal but before actually closing the case, the trustee was served with a state court garnishment. Trustee moved the court for guidance. Section 1326(a)(2) requires the trustee to “return any payment to the debtor if the plan is not confirmed after paying administrative expenses.” Under § 503(b), compensation and reimbursement of expenses awarded under § 330 are allowable administrative expenses. Under § 330(a)(4)(B), the court can allow reasonable compensation to a debtor’s attorney in a Chapter 13 case. “Reading sections 1326(a)(2), 503(b)(2) and 330(a)(4)(B) together, we conclude that the debtor’s attorney’s fees and expenses are administrative expenses which are properly payable by the Trustee prior to the return of the remaining funds to the debtor pursuant to section 1326(a)(2). . . . [W]e also conclude that the language of the statute is clear, the Trustee shall return any undistributed funds to the debtor after paying the debtor’s attorney and all of the debtor’s creditors are entitled to pursue collection through state court proceedings. . . . [T]he remaining funds held by the Trustee shall be returned to the debtor and the creditors are entitled to enforce their rights in the funds through a proper state court proceeding.”).
55 In re Mishler, 223 B.R. 17, 18–20 (Bankr. M.D. Fla. 1998) (IRS levy after dismissal is effective because plan had been confirmed and § 1326(a)(2) did not apply. Plan was confirmed on March 3, 1998. Order of dismissal was entered on March 16, 1998, because debtor failed to make payments under the confirmed plan. The order of dismissal directed the trustee to retain $500 for § 503(b) expenses and to “refund to the debtor the balance of $14,289.58 as required by 11 U.S.C. § 1326.” On March 17, the IRS served a notice of levy on the Chapter 13 trustee. Debtor moved to enforce the March 16 order. Section 1326(a)(2), which requires the trustee to return the funds on hand to the debtor at dismissal of an unconfirmed Chapter 13 case, does not apply because “[a] plan was confirmed in the instant case.” Court cites B & G Ltd. v. Levin (In re Meter Maid Indus.), 462 F.2d 436 (5th Cir. 1972), for the proposition that the assets of a bankruptcy estate are in “custodia legis” and thus are ordinarily not subject to actions by third parties that would “tend to embarrass the court in the equitable distribution of the estate.” However, with dismissal of the Chapter 13 case, no attachment or other exercise of authority by the bankruptcy court is present; thus, “Debtor’s argument that the funds held by the Chapter 13 Trustee are not subject to levy based on custodia legis is without merit.” Citing In re Schlapper, 195 B.R. 805 (Bankr. M.D. Fla. 1996), “once the order of dismissal is entered, and the stay has been lifted, and the Trustee has been ordered to turn over funds to the Debtor, she becomes a debtor of the Debtor to that extent. The funds held by the Trustee are subject to levy or garnishment by creditors of the Debtor, pursuant to applicable law. . . . [I]t is permissible for the Service to levy upon funds held by the Chapter 13 Trustee even in the face of an order directing the Trustee to return those funds to the debtor.”).
56 Nos. MN-02-069, Bk. No. 7-99-14093 MR, Adv. No. 99-1199 M, 2003 WL 131806 (B.A.P. 10th Cir. Jan. 16, 2003) (unpublished).
57 2003 WL 131806, at *3.
58 149 B.R. 494 (Bankr. N.D. Ohio 1993).
59 In re Barrett, 964 F.2d 588 (6th Cir. 1992).
61 Accord Williams v. IMC Mortgage Co. (In re Williams), 246 B.R. 591, 594–96 (B.A.P. 8th Cir. 1999) (At dismissal before confirmation, funds held by Chapter 13 trustee go to the debtor under § 1326(a)(2); prepetition mortgage holder cannot claim administrative expense under § 503(b) for unpaid postpetition mortgage payments. Plan proposed to pay prepetition mortgage through the Chapter 13 trustee. Trustee accumulated $6,397 before Chapter 13 case was dismissed without confirmation. Mortgage holder applied for and received administrative expense for $5,264, representing mortgage payments collected by the trustee but not paid between the filing and dismissal. BAP reverses. Mortgage holder did not ask for adequate protection and cannot prove that the postpetition mortgage payments were either a transaction with the estate or a benefit to the estate. “[T]he postpetition mortgage payment—although not due until after the filing of the petition, was an obligation incurred prior to the creation of the estate. It is not sufficient that the payment became due after the petition date if the transaction was entered into prepetition. . . . [T]here was no evidence, or reasonable articulation of a position, presented to the bankruptcy court that any benefit was accorded the estate or that the accrual of the postpetition mortgage payments was an ‘actual, necessary’ cost of preserving the estate. The incongruous nature of IMC’s argument is demonstrated by the fact that it did not expend any funds to preserve the estate. . . . Courts commonly recognize that § 503(b) is not intended to provide an administrative expense award to a prepetition secured lender based on the debtor’s postpetition possession and use of collateral. . . . [T]he prepetition secured creditor is not contributing a benefit to the estate because the debtor is merely continuing to use property that the debtor already owns. . . . IMC had other remedies that were available to it if it thought its collateral inadequate. . . . IMC could have moved for relief from the automatic stay under § 362(d) to foreclose its mortgage, or it could have requested adequate protection under § 363(e). . . . A prepetition secured creditor’s remedy for use and depreciation of its collateral during the bankruptcy is through a request for adequate protection, not an administrative expense. . . . Section 349 provides that dismissal of a case ‘revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case.’ . . . [P]ostpetition earnings are also property of the estate, the funds held by the trustee revest in the debtor. . . . As a general rule, only upon confirmation of the plan does the trustee distribute funds pursuant to the plan. As a result, creditors receive no payment on the debts owed to them until such time as the plan is confirmed. If there is litigation regarding the contents of the plan or other cause for delay, creditors may be harmed by delay in receiving payments. Section 1326, however, establishes a clear and explicit command to the trustee that, upon dismissal, if there is no confirmed plan, funds will be returned to the debtor less any unpaid claims allowed under § 503(b).”); In re Walter, 199 B.R. 390, 392–93 (Bankr. C.D. Ill. 1996) (At voluntary dismissal before confirmation, § 1326(a)(2) requires return to the debtor of postpetition payments held by the Chapter 13 trustee; bank is not entitled to funds because it did not ask for adequate protection and has no administrative claim. “By its clearly expressed terms, § 1326(a)(2) directs the Chapter 13 trustee to return post-petition payments to the debtor if the plan is not confirmed. The statute provides one exception to this general rule, which permits the trustee to deduct and pay any administrative expense claims arising under § 503(b). . . . Under § 349(b)(3), even if Debtors’ plan payments in this case came from pre-petition inventory and/or accounts receivable, the undistributed funds would revest in Debtors upon the dismissal of the case. . . . [T]he Bank argues that it is entitled to the funds as adequate protection to offset any impairment to the value of its collateral. However, a request for adequate protection must be made prospectively. . . . A bank cannot after the fact demand funds paid to the trustee as adequate protection. . . . As for the Bank’s assertion that it is somehow entitled to an administrative expense claim based upon some implied (but unproven) diminution in the value of its collateral, nothing in § 503(b) suggests that a mortgagee is entitled to an administrative expense claim for its costs in protecting and preserving its collateral. . . . Administrative expenses are normally expenses incurred at the instance of the trustee which are designed to benefit the estate generally, not simply one creditor or the debtor.”).
62 11 U.S.C. § 362(c)(2)(B). See Lugo v. Saez, 721 F.2d 848 (1st Cir. 1983) (Dismissal immediately terminates stay. Creditor need not wait 10 days after dismissal before commencing or completing foreclosure.). [Note: The language of former Bankruptcy Rule 762 discussed in this decision is not carried into new Bankruptcy Rule 7062.] Accord In re Garnett, 303 B.R. 274, 278 (E.D.N.Y. 2003) (“[D]ismissal of the bankruptcy petition has the . . . effect of . . . lifting the automatic stay.”); Shaw v. Ehrlich, 294 B.R. 260, 275 (W.D. Va. 2003) (Automatic stay terminated at dismissal of Chapter 13 case and was not revived by motion for reconsideration notwithstanding that bankruptcy court converted the dismissed case to Chapter 11. “When the bankruptcy court entered its order of dismissal on April 3, 2002, the automatic stay was immediately terminated, regardless of the rights of appeal and rights of reconsideration held by the Debtors. . . . Because the bankruptcy court had already dismissed the case, it was impossible for the court to then convert the case under section 348, as no ‘case’ existed for the court to convert.”); In re Barnes, 119 B.R. 552 (S.D. Ohio 1990) (Where the dismissal was not the result of a determination by the bankruptcy court of a disputed issue in the context of a contested matter, the 10-day automatic stay provision of Bankruptcy Rule 7062 is not applicable and a creditor can proceed with its collection action upon entry of the order of dismissal.); Bluford v. First Fidelity Mortgage Co., 40 B.R. 640 (Bankr. W.D. Mo. 1984).
63 See Fed. R. Bankr. P. 4001(a)(3) (as amended in 1999) (“An order granting a motion for relief from an automatic stay . . . is stayed until the expiration of 10 days . . . unless the court orders otherwise.”).
64 See, e.g., In re Hanson, 282 B.R. 240, 245–46 (Bankr. D. Colo. 2002) (“[N]either Rule 7062 nor Section 362 provide a stay in a bankruptcy case which has been dismissed. . . . As a result of the 1999 amendments to the Rules, Rule 62 is not applicable to stay the effectiveness of the Order of Dismissal.”).
65 See In re Dandridge, 221 B.R. 741 (Bankr. W.D. Tenn. 1998) (Dismissal of prior Chapter 13 case did not validate attempted exercise of call provision in mortgage note because attempted call violated automatic stay in the prior case, and after dismissal, note holder took no action with respect to the call provision. Automatic stay in subsequent Chapter 13 case prevents further exercise of the call provision without relief from the stay. Attempted exercise of call in prior case was invalid and voidable.).
66 See Burgner v. Georgia Fed. Credit Union (In re Burgner), 218 B.R. 413 (Bankr. E.D. Tenn. 1998) (Dismissal of underlying Chapter 13 case does not abate debtors’ motion for sanctions for violation of the automatic stay against a creditor that repossessed the debtors’ car after the petition but before dismissal of the Chapter 13 case.). Accord Transouth Fin. Corp. v. Sharon (In re Sharon), 234 B.R. 676 (B.A.P. 6th Cir. 1999).
67 See Aheong v. Mellon Mortgage Co. (In re Aheong), 276 B.R. 233 (B.A.P. 9th Cir. 2002) (Bankruptcy court retained jurisdiction to consider creditor’s motion to annul stay after dismissal and closing of Chapter 13 case; bankruptcy court appropriately annulled stay in first of three bankruptcy cases to validate foreclosure.).
68 See In re Case, 27 B.R. 844 (Bankr. D.S.D. 1983). Accord United States v. Hampton, 197 B.R. 297 (E.D. Ark. 1995) (Consent order in dismissed Chapter 13 case that fixed the allowed amount of the IRS’s priority claim does not preclude the IRS from filing an “amended” claim in a subsequent Chapter 13 case that includes additional penalties.); Bernhardt v. Commonwealth Mortgage Corp. of Am. (In re Bernhardt), 186 B.R. 889 (Bankr. E.D. Pa. 1995) (Order in prior Chapter 13 case that mortgage was subject to modification under § 1322(b)(2) is without res judicata effect in subsequent Chapter 13 case because dismissal vacated the order under § 349(b)(1)(C). Debtor gets new order allowing modification.).
69 935 F.2d 918 (7th Cir. 1991).
70 Federal Nat’l Ass’n v. Wallace, 33 B.R. 29 (Bankr. W.D. Mich. 1983) (Dismissal before consummation defeats argument that confirmation reinstated mortgage and tolled statutory redemption period. Prefiling foreclosure sale is effective as if Chapter 13 case has never been filed.). See also the discussion of Peters v. Mason-McDuffie Mortgage Corp. (In re Peters), 101 F.3d 618 (9th Cir. 1996), in §§ 75.1 [ Examples of Stay Violations, and Not ] § 62.1 Examples of Stay Violations, and Not, 235.1 [ Other Limitations ] § 121.4 Other Limitations and 340.1 [ Reinstatement after Dismissal ] § 153.4 Reinstatement after Dismissal.
71 In re Garnett, 303 B.R. 274 (E.D.N.Y. 2003). See below in this section, and see § 75.1 [ Examples of Stay Violations, and Not ] § 62.1 Examples of Stay Violations, and Not.
72 See Martin v. Great W. Bank (In re Martin), 96 B.R. 1009 (B.A.P. 9th Cir. 1989) (Debtor’s failure to seek a stay pending appeal of an order dismissing third Chapter 13 petition is fatal to the appeal where foreclosure sale is completed and there is no evidence of impropriety in the sale.). Accord Omoto v. Ruggera (In re Omoto), 85 B.R. 98 (B.A.P. 9th Cir. 1988). See also Colomba v. Solomon (In re Colomba), 257 B.R. 368 (B.A.P. 1st Cir. 2001) (Although first motion to reconsider order dismissing Chapter 13 case extended the time for timely appealing under Bankruptcy Rule 8002(b), second motion for “re-reconsideration” did not preserve the 10-day period for appeal; debtor’s appeal of the order denying the motion for re-reconsideration was not a timely appeal of the original order of dismissal.).
73 46 B.R. 802 (Bankr. W.D. Mo. 1984).
74 See Young v. United States (In re Young), 535 U.S. 43, 122 S. Ct. 1036, 152 L. Ed. 2d 79 (2002) (Three-year lookback for priority and nondischargeability of taxes is tolled during the automatic stay in a prior bankruptcy case.).
75 See § 136.2 Taxes before BAPCPA and § 136.3 Taxes after BAPCPA. See, e.g., Brickley v. United States (In re Brickley), 70 B.R. 113 (B.A.P. 9th Cir. 1986); Blakely v. United States (In re Blakely), 219 B.R. 722 (Bankr. S.D. Miss. 1998) (After dismissal of Chapter 13 case and filing of Chapter 7 case, the statutory period for priority of tax claims under § 507(a)(8) is “equitably tolled” for the period of the pendency of the Chapter 13 case.); Tibaldo v. United States (In re Tibaldo), 187 B.R. 673 (Bankr. C.D. Cal. 1995) (In a Chapter 7 case filed after dismissal of a Chapter 13 case, the two-year period in § 523(a)(1)(B)(ii) was suspended by 26 U.S.C. § 6503(b) and (h) during the pendency of the Chapter 13 case and for six months after dismissal.); Florence v. IRS (In re Florence), 115 B.R. 109 (Bankr. S.D. Ohio 1990).
76 See In re Hess, 173 B.R. 426, 429 (Bankr. W.D. Okla. 1994) (Interest that accrued during prior Chapter 13 case is allowable as part of a tax claim where debtor dismisses and refiles. “[D]uring the pendency of a bankruptcy case, the taxing authorities nevertheless continue to accrue, for bookkeeping purposes, penalties and interest on pre-petition tax obligations. If a discharge is entered in the case, the accrued penalties and interest are abated, but if no discharge is received by the debtor, the authorities will attempt to collect the accrued amounts from the debtor after bankruptcy. . . . [T]he failure of Congress to specifically include tax penalties and interest in the § 349(b) list of items reinstated upon dismissal does not indicate an intention not to reinstate them. . . . After the case is dismissed and a new case filed, the penalties and interest accrued during the previous case on tax obligations which arose prior to the filing of the earlier case are no longer unmatured. Under the language, and clear intent of § 349(b), it is as though the earlier case had never been filed.”). See also § 158.1 Alimony, Maintenance or Support, § 158.2 Student Loans, § 159.5 Domestic Support Obligations: § 523(a)(5) and § 159.6 Student Loans: § 523(a)(8).
77 See § 225.1 [ Appeal of Grant or Denial of Confirmation ] § 117.4 Appeal of Grant or Denial of Confirmation.
78 271 F.3d 898 (9th Cir. 2001).
79 520 U.S. 43, 117 S. Ct. 1055, 137 L. Ed. 2d 170 (1997).
80 Spencer v. Labarge (In re Spencer), 301 B.R. 730 (B.A.P. 8th Cir. 2003).
81 Moss v. 245 E. 25th Realty Corp., Nos. 01 Civ. 9318(SHS), 00-B-42097(CB), 2002 WL 31426204 (S.D.N.Y. Oct. 29, 2002) (unpublished).
82 No. Civ. A. 03-521, 02-16708, 2003 WL 22038392 (E.D. La. Aug. 20, 2003) (unpublished).
83 282 B.R. 883 (B.A.P. 9th Cir. 2002).
84 See § 158.3 Driving while Intoxicated and § 159.8 Boating or Flying while Intoxicated: § 523(a)(9) for discussion of the exception to discharge for driving while intoxicated under § 523(a)(9).
85 282 B.R. at 891.
86 Fed. R. Bankr. P. 8012(a). See, e.g., In re Muecke, No. SA-03-CA-060, 2003 WL 22143257 (W.D. Tex. July 17, 2003) (unpublished) (Notice of appeal of oral order dismissing Chapter 13 case is effective under Bankruptcy Rule 8002(a) on the day written order was subsequently entered.).
87 See, e.g., Chapman v. Currie Motors, Inc., 65 F.3d 78 (7th Cir. 1995) (Dismissal of Chapter 13 case does not end district court or bankruptcy court jurisdiction over adversary proceeding by debtor against a nondebtor. However, district court appropriately exercised its discretion to relinquish jurisdiction to the state courts where debtor’s cause of action arose under state law and “there was not even a remote federal interest” in the litigation.); Porges v. Gruntal & Co. (In re Porges), 44 F.3d 159 (2d Cir. 1995) (Dismissal of Chapter 13 case does not abate adversary proceeding in which a bankruptcy court entered a money judgment against the debtor for churning brokerage accounts.); Williams v. Citifinancial Mortgage Co. f/k/a IMC Mortgage Co. (In re Williams), 256 B.R. 885, 898 (B.A.P. 8th Cir. 2001) (Dismissal of Chapter 13 case did not defeat bankruptcy court jurisdiction over debtor’s motion to recover funds paid by the trustee to a mortgage company after dismissal; bankruptcy court should not have abstained from debtor’s motion for turnover when bankruptcy court’s order to pay money to the mortgage holder was reversed on appeal. While the debtor’s appeal was pending in Williams I, see Williams v. IMC Mortgage Co. (In re Williams), 246 B.R. 591 (B.A.P. 8th Cir. 1999), the mortgage holder applied the funds received from the trustee to its claim for an administrative expense. After the BAP reversed the bankruptcy court in Williams I, IMC refused the debtor’s request for return of the funds, and IMC filed an action in state court for damages and unlawful detainer. The debtor moved the bankruptcy court for turnover of the funds the BAP ordered IMC to return to the debtor in Williams I. The bankruptcy court held it was without jurisdiction, that it should abstain and that the debtor’s motion was moot. The BAP reversed again on all points. IMC had “failed to act equitably.” The BAP (again) ordered IMC to pay the debtor the money it received from the trustee.); Smith v. Beal Acceptance Corp., 244 B.R. 487 (N.D. Ga. 2000) (Bankruptcy court did not abuse its discretion in retaining jurisdiction over Truth-in-Lending Act adversary proceeding after dismissal of Chapter 13 case; dismissal with prejudice of adversary proceeding during prior Chapter 13 case precluded identical claims in adversary proceeding in subsequent Chapter 13 case under principles of res judicata.); Chapman v. Charles Schwab & Co. (In re Chapman), 265 B.R. 796 (Bankr. N.D. Ill.) (Bankruptcy court exercises its discretion to retain jurisdiction over an adversary proceeding notwithstanding dismissal of the underlying Chapter 13 case. It would be inconvenient, expensive and unfair to force the other parties to the adversary proceeding to undertake relitigation.), on reconsideration, 269 B.R. 201 (Bankr. N.D. Ill. 2001).
88 See, e.g., In re Garnett, 303 B.R. 274, 278 (E.D.N.Y. 2003) (Dismissal of Chapter 13 case divested bankruptcy court of jurisdiction to order that mortgage holder re-notice its pending foreclosure sale. “[D]ismissal of the bankruptcy petition has the. . .effect of undoing the bankruptcy estate. . . . Once the case is dismissed and is no longer pending, the bankruptcy court is divested of exclusive jurisdiction over the property of the Debtor.”); Harris v. Citigroup Inc. (In re Harris), 298 B.R. 987 (Bankr. M.D. Ala. 2003) (Bankruptcy court is without subject matter jurisdiction over civil action filed in state court during Chapter 13 case and removed to bankruptcy court after Chapter 13 case was dismissed.).
89 Midi Music Ctr., Inc. v. Smith (In re Smith), 140 B.R. 904 (Bankr. D.N.M. 1992).