In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 14-2423

IN RE: SWEPORTS, LTD.,

Debtor-Appellee.

APPEAL OF: MUCH SHELIST, P.C., et al.,

Creditors-Appellants.

____________________

Appeal from the United States Bankruptcy Court for the

Northern District of Illinois, Eastern Division.

No. 12-14254 — A. Benjamin Goldgar, Bankruptcy Judge.

____________________

ARGUED DECEMBER 12, 2014 — DECIDED JANUARY 9, 2015

____________________

Before POSNER, WILLIAMS, and TINDER, Circuit Judges.

POSNER, Circuit Judge. Before us is a direct appeal from 

the bankruptcy court for the Northern District of Illinois 

pursuant to 28 U.S.C. § 158(d)(2). The question it presents is 

the authority of a bankruptcy judge to make an award of 

fees after dismissal of the bankruptcy proceeding and the

consequent revesting of the assets of the debtor’s estate in 

the debtor. 11 U.S.C. § 349(b)(3). The fees in question are 

sought by the counsel (Neal L. Wolf) for, and a financial advisor (Pierre Benoit, whom Wolf also represents) to, an Offi-
2 No. 14-2423

cial Committee of Unsecured Creditors that the U.S. Trustee 

had appointed during the bankruptcy proceeding. 11 U.S.C. 

§ 1102(a)(1). Wolf’s law firms (he has been a member of two 

law firms during this litigation) and Benoit’s financial advisory firm (Pierre Benoit & Associates, Inc.) are also parties to 

the appeal, but seek no additional relief and can therefore be 

ignored. To simplify the opinion further we’ll pretend that 

Wolf is the only appellant.

The bankruptcy judge denied the awards on the ground 

that, the bankruptcy having been dismissed, he had no jurisdiction to make such awards. He reasoned that the 

awards could be paid only out of the assets of the debtor’s 

estate, and there were no such assets now that the bankruptcy had been dismissed and consequently all the assets of the 

debtor’s estate had been returned to the debtor. There is, 

however, as we’ll see, a critical difference, missed by the 

bankruptcy judge, between determining an entitlement to 

fees and ordering payment of fees.

Sweports, Ltd., owns patents and a subsidiary called 

UMF Corporation that manufactures antimicrobial cleaning 

products; UMF apparently is Sweports’ principal asset. In 

April 2012 several judgment creditors of Sweports, represented by attorney Wolf, petitioned the bankruptcy court in 

Chicago to place Sweports in Chapter 11 bankruptcy (reorganization). Sweports consented, and became the debtor in 

possession, with its assets therefore constituting a debtor’s 

estate in bankruptcy. Sweports objected to Wolf’s retention 

as counsel to the Official Committee of Unsecured Creditors, 

on the ground that he had a conflict of interest because he 

was continuing to represent several of Sweports’ judgment 

creditors. But the bankruptcy judge ruled that there was no 
No. 14-2423 3

conflict. Judgment creditors are unsecured; Wolf did not 

represent any judgment creditors whose claims were adverse to those of the unsecured creditors represented by the 

Official Committee—indeed it’s unclear whether Wolf was 

still representing any judgment creditors or other creditors

when he agreed to represent the Official Committee.

Both Sweports and the Official Committee filed plans of 

reorganization. The bankruptcy judge rejected the plans. The 

U.S. Trustee then moved that Sweports’ bankruptcy either 

be converted from Chapter 11 to Chapter 7 (liquidation) or 

dismissed. Neither Sweports nor the creditors favored conversion, and so the bankruptcy judge dismissed the bankruptcy.

That was on April 30, 2014, and several weeks later Wolf 

filed with the bankruptcy court a motion seeking an award 

of attorney’s fees and expenses totaling some $780,000 (we’re 

rounding off all dollar figures to the nearest $10,000), all for 

his work for the Official Committee of Unsecured Creditors. 

This was his second fee request for that work. An interim 

request for an award of fees and expenses of some $410,000 

had been made and granted earlier, while Sweports was in 

bankruptcy, but very little of it had been paid. As a result 

Wolf’s final request, superseding the earlier request, sought 

a total of more than $1.13 million—plus some $100,000 in 

fees and expenses for Benoit, the financial consultant whom 

Wolf was and is representing. 

The creditors wanted the bankruptcy dismissed because 

they would of course remain creditors of Sweports and 

thought they would do better suing it in state court immediately rather than waiting to scramble for pieces of it if it were

liquidated. That was not an option for Wolf except with re-
4 No. 14-2423

spect to his interim request for fees, since that had been 

granted before the bankruptcy proceeding was dismissed 

(and in fact Wolf has sued Sweports in an Illinois state court 

for the unpaid portion of those fees). Until and unless he received a fee award from the bankruptcy judge, the remaining amount of fees and expenses that he was seeking would 

not be a debt of Sweports, and so he would have no basis for 

pursuing a claim against the company in state court. Wolf 

had not become a creditor of Sweports as a result of being 

hired by the Official Committee of Unsecured Creditors, except with respect to the interim fee award, an administrative 

expense that the bankruptcy judge had already—before 

dismissing the bankruptcy—ordered Sweports to pay. With 

the dismissal of the bankruptcy, Sweports became liable in 

the ordinary way (that is, outside of bankruptcy proceedings) to pay the debts that it had had as debtor in possession. 

For “on dismissal a bankrupt is reinvested with the estate, 

subject to all encumbrances which existed prior to the bankruptcy. After an order of dismissal, the debtor’s debts and 

property are subject to the general laws, unaffected by bankruptcy concepts.” In re Income Property Builders, Inc., 699 F.2d 

963, 965 (9th Cir. 1982). The problem for Wolf is that the 

bankruptcy judge did not order Sweports to pay the rest of 

the fee that Wolf had earned for his work for the Official 

Committee.

The bankruptcy judge refused to issue such an order not 

because he thought Wolf’s claim to the rest of the fee without merit, but because he thought that having dismissed the 

bankruptcy he had no authority to issue any further order 

relating to it. There was no longer a debtor in possession, no 

longer a debtor’s estate in bankruptcy, no longer any assets 

under the control of the bankruptcy court, and therefore, he 
No. 14-2423 5

decided, no possible relief that he could grant Wolf. That 

was incorrect. It’s true that with the bankruptcy dismissed 

the bankruptcy judge could no longer disburse assets of the 

debtor’s estate to anyone; it had no assets; it was defunct.

But the judge could determine that Wolf had a valid claim to 

a fee in the amount he was seeking. Such a ruling would 

create a debt of Sweports to Wolf, and if Sweports refused

(as Wolf expects it would) to pay, he could, like any other 

creditor, sue Sweports in state court. Sweports thus is wrong 

to say as it does in its brief “that in the absence of an estate 

[in bankruptcy] to pay fees and expenses, the Bankruptcy 

Court could not grant meaningful relief to Wolf.” An order 

that Wolf could take into state court as a basis for obtaining 

damages from Sweports would be meaningful relief. There 

would be nothing novel about such an order. Almost every 

damages suit that is resolved in favor of the plaintiff ends 

not with a disbursement of money but with a judgment that 

establishes a debt. If the defendant fails to pay, the plaintiff 

must initiate a further proceeding to collect the judgment 

debt. The judgment to which Wolf was and is entitled would 

merely establish a debt; to collect it he will undoubtedly 

have to initiate a collection suit in state court.

The Bankruptcy Code authorizes fee-and-expense

awards to persons who provide assistance in a bankruptcy 

proceeding, see 11 U.S.C. § 330(a)(1), and the Judicial Code 

grants federal jurisdiction over all civil proceedings “arising 

in or related to cases under” the Bankruptcy Code. 28 U.S.C. 

§ 1334(b). Wolf has a civil proceeding, arising in and related 

to Sweports’ bankruptcy, in which he is seeking from a 

bankruptcy court an order that he can use to obtain cash 

elsewhere. The order, if granted, would confer a real value.
6 No. 14-2423

It would therefore not be “moot,” as the bankruptcy judge 

said in embroidering his jurisdictional ruling.

Had Wolf sought such an order a few weeks earlier, before the bankruptcy proceeding was dismissed, the judge 

would doubtless have issued it. What caused Wolf to delay, 

he explains, was his ethical obligations to the unsecured 

creditors that he represented as counsel to the Official 

Committee of Unsecured Creditors. All Sweports’ unsecured

creditors wanted the bankruptcy proceeding dismissed 

posthaste so that they could pursue their state remedies 

against Sweports, which they couldn’t do until the proceeding was dismissed because until then litigation against Sweports in other courts was stayed. 11 U.S.C. §§ 362(a)(1), (2). 

Had Wolf moved before dismissal of the bankruptcy for his 

fee award for services to the Official Committee of Unsecured Creditors, dismissal of the bankruptcy would have 

been delayed while the bankruptcy judge considered his request and Sweports’ opposition. The delay would have hurt 

the unsecured creditors—Wolf’s direct or indirect clients. So

as not to delay the dismissal of the bankruptcy, he held off 

on requesting an order for payment of the fees he was due.

The postponement in filing his request until the bankruptcy was dismissed hurt no one. It merely gave Sweports a 

shot at a windfall—eliminating, by appealing to a wooden 

concept of jurisdiction, a debt that it had incurred. A court 

loses jurisdiction over a case when it issues a final judgment, 

which is to say a judgment that resolves the controversy between the parties. The order dismissing the bankruptcy 

didn’t do that. There was a loose end, left dangling—Wolf’s 

claim for fees. He needed that ruling to be able to enforce the 

entitlement in state court.
No. 14-2423 7

There is no novelty to the idea that a court has besides its 

ordinary jurisdiction a “clean-up” jurisdiction (“ancillary” 

jurisdiction, it is commonly called) to take care of minor 

loose ends. It is implicit in two of the statutory provisions 

we cited earlier, 11 U.S.C. § 330(a)(1) and 28 U.S.C. § 1334(b). 

Most though not all cases recognize that bankruptcy courts 

have such authority. Compare In re 5900 Associates, Inc., 468 

F.3d 326, 330–31 (6th Cir. 2006); In re Taylor, 884 F.2d 478, 481

(9th Cir. 1989), and In re Dahlquist, 751 F.2d 295, 298–99 (8th 

Cir. 1985), with In re Advanced Computer Technology Act, Inc., 

2013 WL 5661203 (D. Puerto Rico Oct. 15, 2013), and Iannini 

v. Winnecour, 487 B.R. 434, 438–40 (W.D. Pa. 2012). If the 

bankruptcy judge in this case, realizing that a request for 

fees would be coming from Wolf, had delayed the bankruptcy, the creditors would as we said have been hurt. So a sensible course of action was to dismiss the bankruptcy and 

leave for later a determination of how much Sweports owed 

Wolf. An alternative would have been to lift the automatic 

stay of suits by creditors of a debtor that is in bankruptcy. 

The creditors, including Wolf, could then have proceeded 

with efforts to collect their debts even though the bankruptcy hadn’t yet been dismissed. But there’s no reason why 

dismissing the bankruptcy and leaving for later a determination by the bankruptcy judge of how much Sweports owed 

Wolf should be thought an alternative outside the judge’s 

jurisdiction. The judge suggested no reason—just the bare, 

formalist conclusion that with dismissal he had lost jurisdiction to do anything further that would be related to the bankruptcy.

Sweports argues that Wolf should have asked the bankruptcy judge to “reserve” jurisdiction over his fee request 

when the judge dismissed the bankruptcy. The bankruptcy 
8 No. 14-2423

judge made clear that he would refuse to reserve jurisdiction. And we can’t see what an explicit reservation would 

have done for anybody.

We’re left with no reason to think that Wolf should be 

disentitled, whether as a matter of statutory or constitutional 

interpretation or good sense, to pursue in the bankruptcy 

court his request for an award (not payment, but a determination of what he is owed) of fees for his services to the Official Committee of Unsecured Creditors.

REVERSED AND REMANDED.