Opinion
BANKRUPTCY NO. 03-10092, DOCUMENT NO. 57.
June 4, 2008
MEMORANDUM
Before the Court is the Debtors' MOTION TO DISBURSE BALANCE ON HAND TO DEBTORS. Debtors seek an Order which requires the Trustee to disburse $17,624.21 held by the Trustee to the Debtors.
The Debtors filed a voluntary Petition under Chapter 13 of the Bankruptcy Code on January 16, 2003. The Debtors' Chapter 13 Plan was confirmed by Order dated May 19, 2003. The bankruptcy case was dismissed by Order dated November 16, 2007. 11 U.S.C. § 1326 provides in pertinent part:
§ 1326. Payments
(a)(1) Unless the court orders otherwise, the debtor shall commence making payments not later than 30 days after the date of the filing of the plan or the order for relief, whichever is earlier, in the amount —
. . .
(2) A payment made under paragraph (1)(A) shall be retained by the trustee until confirmation or denial of confirmation. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan as soon as is practicable. . . .
As Judge Cosetti states in In re Waugh, 82 B.R. 394, 400 (Bankr. W.D. PA 1988):
The mandate of 11 U.S.C. § 1326 creates a trust of chapter 13 payments received during the pendency of a confirmed plan. The trust created should not be dependent on the speed of its distribution. The valid confirmation order of the Bankruptcy Court should not be made a nullity by a later failure of the debtor to observe a confirmed plan.
Id.
"When debtors have voluntarily paid funds to the Chapter 13 Trustee pursuant to the terms of a confirmed plan, the creditors' rights to receive funds pursuant to the confirmed plan vests at the time the trustee receives the funds and debtors can no longer retain any reasonable expectation that such funds will be returned to them under any circumstances, including a conversion or dismissal." In re Halpenny, 125 B.R. 814, 815-16 (Bankr. D. HI 1991).
Our local General Court Procedures ("GCP") are in accord. Chapter 13 Procedure #4(G) provides:
In the event of conversion or dismissal following the confirmation of a plan, then the Chapter 13 Trustee shall distribute all funds received prior to the effective date of the conversion or dismissal, in accordance with the terms of the confirmed plan.
We conclude that once a Chapter 13 Plan is confirmed, payments received by the Trustee prior to conversion or dismissal of the case must be distributed to creditors in accordance with the terms of the Plan.
An appropriate Order will be entered.
ORDER
This 4th day of June, 2008, in accordance with the accompanying Memorandum, it shall be and hereby is, ORDERED that the EMERGENCY MOTION TO DISBURSE BALANCE ON HAND TO DEBTORS is DENIED.