Source: https://lundinonchapter13.com/Content/Section/150.2
Timestamp: 2019-10-24 04:03:53
Document Index: 157346455

Matched Legal Cases: ['§ 150', '§ 150', '§ 706', '§ 707', '§ 707', '§ 707', '§ 1307', '§ 706', '§ 707', '§ 707', '§ 707', '§ 707', '§ 707', '§ 707', '§ 707', '§ 707', '§ 707', '§ 707', '§ 707', '§ 706', '§ 706', '§ 707', '§ 707', '§ 707', '§ 707', '§ 707', '§ 706', '§ 707', '§ 707', '§ 707', '§ 707', '§ 707', '§ 523', '§ 706', '§ 324', '§ 148', '§ 148', '§ 1307', '§ 1307', '§ 706', '§ 531', '§ 707', '§ 142', '§ 707', '§ 707', '§ 531', '§ 707', '§ 142', '§ 707', '§ 706', '§ 706', '§ 544', '§ 156', '§ 538', '§ 148', '§ 706', '§ 707', '§ 707', '§ 706', '§ 707', '§ 707', '§ 348', '§ 1306', '§ 109', '§ 1329', '§ 326', '§ 348', '§ 1327', '§ 706', '§ 706', '§ 706', '§ 1307', '§ 707', '§ 707', '§ 707']

§ 150.2 Reconversion to Chapter 13 after BAPCPA
Cite as: Keith M. Lundin, Lundin On Chapter 13, § 150.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
Updater Cases (15)
There may be some interesting new issues after BAPCPA when an individual debtor has converted to or from a Chapter 13 case and then reconverts. One such fact pattern is fairly common: an individual debtor files a Chapter 7 case, converts to Chapter 13 and later reconverts to Chapter 7. Less common but perhaps encouraged by BAPCPA is the debtor who files a Chapter 13 case, converts to Chapter 7 and then is “forced” to convert back to Chapter 13. BAPCPA adds some wrinkles to the more common form of reconversion and perhaps promotes the form that was almost never seen in pre-BAPCPA practice.
Voluntary conversion from Chapter 7 to Chapter 13 has always been available under § 706(a) so long as the case had not previously been converted to Chapter 7, 11, 12 or 13.1 Conversion from Chapter 7 to Chapter 13 is perhaps more likely after BAPCPA because the “abuse” test in § 707(b) may force or encourage some Chapter 7 debtors to convert to Chapter 13 by request or consent. Prior to BAPCPA, after conversion from Chapter 7 to Chapter 13, there was always the possibility that the Chapter 13 case would fail and the debtor would reconvert to Chapter 7. There were no statutory barriers to returning to Chapter 7 after an attempt to pay creditors through the Chapter 13 case.
BAPCPA raises the possibility that there will be problems at reconversion when the first conversion from Chapter 7 to Chapter 13 was forced by a finding of abuse under § 707(b).
Imagine an individual debtor’s case filed under Chapter 7 that is found to be an abuse of Chapter 7 under § 707(b)(1). At that point, the court has a choice to dismiss or “with the debtor’s consent” convert the case to Chapter 11 or 13. Assume the debtor consents and the case is converted to Chapter 13. After some attempt at paying creditors, the Chapter 13 case fails and the debtor moves to convert back to Chapter 7.
There is no obstacle to reconversion from Chapter 13 to Chapter 7 in § 1307. In fact, the debtor can convert a case from Chapter 13 to Chapter 7 “at any time” and the waiver of that right is unenforceable.2 And on request of the debtor, the Chapter 13 case could not be dismissed without an opportunity for objection from creditors and the trustee because the Chapter 13 case in this example was previously converted from Chapter 7 under § 706.3 In other words, once converted from Chapter 7 to Chapter 13, if the case fails as a Chapter 13 case, it cannot be dismissed voluntarily by the debtor. But what happens if the debtor converts the case back to Chapter 7?
Is the abuse test under § 707(b) applicable at reconversion from Chapter 13 to Chapter 7? In this example, it was the abuse test in § 707(b) that “forced” the debtor from Chapter 7 into Chapter 13 in the first place. Arguably, the abuse test in § 707(b)(1) applies only to a case “filed . . . under this chapter.”4 Is a case converted from Chapter 13 to Chapter 7 “filed” under Chapter 7? There is no question that the case in this example was “converted” to Chapter 7; there is at least an argument that it was also “filed” (originally) under Chapter 7.
If the abuse test in § 707(b) does apply at reconversion from Chapter 13 to Chapter 7—after a previous conversion (because of abuse) from Chapter 7 to Chapter 13—is the debtor precluded from contesting abuse the second time around for § 707(b) purposes? Would the attempted Chapter 13 case be a “special circumstance” for purposes of § 707(b)(2)(B) if the abuse test is applied at reconversion from Chapter 13 to Chapter 7?
Notice the interesting box the debtor is in. The abuse test in § 707(b) forced this hypothetical debtor to consent to conversion from Chapter 7 to Chapter 13. Once in Chapter 13, the debtor cannot voluntarily dismiss the Chapter 13 case because the case was previously a Chapter 7 case and debtors cannot use conversion from Chapter 7 to Chapter 13 as a ruse to avoid liquidation in a Chapter 7 case. But when the Chapter 13 case fails and the debtor voluntarily (or otherwise) reconverts to Chapter 7, is it possible that BAPCPA confronts the debtor with a second round of abuse testing? And if the debtor is precluded from contesting abuse when the case returns to Chapter 7 or if after a contest, the debtor is found again to be abusing Chapter 7, is dismissal the only remedy?5 What if some or all of the creditors don’t want the Chapter 7 case dismissed? Do creditors have standing to “force” the debtor to stay in Chapter 7 even though the case is an abusive Chapter 7 case on reconversion according to § 707(b)?
There is a different twist to these issues when our hypothetical debtor starts in Chapter 13 (instead of in Chapter 7). Suppose the original Chapter 13 case fails and the debtor converts to Chapter 7. There is the threshold question whether the abuse test in § 707(b) applies at conversion from Chapter 13 to Chapter 7. There are good arguments that the abuse test in § 707(b) does not apply to a case filed under Chapter 13 and converted to Chapter 7.6
If the abuse test in § 707(b) does not apply, can the debtor reconvert to Chapter 13 after once converting from Chapter 13 to Chapter 7? Section 706(a) was not amended by BAPCPA and the section recites that the debtor can convert a case from Chapter 7 to Chapter 13 at any time “if the case has not been converted under section . . . 1307.”7 Some courts have concluded that this language precludes conversion from Chapter 7 to Chapter 13 if the case was previously converted to Chapter 7 from Chapter 13.
But notice that § 706(c) was amended by BAPCPA to provide “the court may not convert a case under this chapter [Chapter 7] to a case under . . . chapter 13 of this title unless the debtor requests or consents to such conversion.”8 Can a Chapter 13 debtor after BAPCPA consent to conversion from Chapter 7 to Chapter 13 if the conversion request comes from a party in interest other than the debtor? There is no provision of § 706 for conversion from Chapter 7 to Chapter 13 on request of a party in interest other than the debtor. But what about § 707(b)(1)?
If § 707(b)(1) does apply at conversion from Chapter 13 to Chapter 7, could the bankruptcy court exercise the option in § 707(b)(1) to convert the case back to Chapter 13—with the debtor’s consent?
The fact pattern that would present this issue is hardly far-fetched. A debtor begins in a Chapter 13 case and fails. The case converts to Chapter 7 but because the debtor has experienced a change in financial circumstances, the Chapter 7 case is presumptively abusive (this assumes that § 707(b) applies at conversion from Chapter 13 to Chapter 7). The debtor asks the bankruptcy court for a second chance at Chapter 13. Could the bankruptcy court grant that second chance after BAPCPA? With the debtor’s consent, there certainly seems to be such a possibility in § 707(b)(1). Perhaps it can’t be accomplished voluntarily through § 706(a), but the finding of abuse under § 707(b)(1) wouldn’t be on the debtor’s motion, and with the debtor’s consent all of the conditions for (re)conversion to Chapter 13 could be present.
Interim Rule 1019 addresses only the common form of reconversion—the case that starts as a Chapter 7, converts to Chapter 13 and then returns to Chapter 7. In Interim Rule 1019(2), as amended after BAPCPA, a new time period for filing a motion under § 707(b) commences when a Chapter 13 case “has been converted or reconverted to a chapter 7 case”—so long as the period for filing a motion under § 707(b) did not expire in the original Chapter 7 case before conversion to Chapter 13. Interim Rule 1019(2) applies a similar rule to complaints objecting to discharge or to dischargeability under Bankruptcy Rule 4004 or 4007: new time periods commence when a Chapter 13 case has been converted or reconverted to a Chapter 7 case unless the 60-day period after the first date set for the meeting of creditors expired in the original Chapter 7 case before conversion to Chapter 13.
These provisions in Interim Rule 1019(2) certainly signal that the rules drafters believe that § 707(b) does apply at conversion from Chapter 13 to Chapter 7 and at reconversion from Chapter 13 to Chapter 7, though this hardly seems certain under the language of § 707(b)(1) itself. The Bankruptcy Rules do not address the question whether the time period for filing a complaint to determine the dischargeability of debt under Bankruptcy Rule 4007 restarts at conversion from Chapter 7 to Chapter 13 or at reconversion from Chapter 7 to Chapter 13 (if reconversion is possible).9
Bankruptcy Rule 1019(2) makes the clear policy choice that at conversion from Chapter 13 to Chapter 7, a new period for objecting to the dischargeability of debt under § 523(a)(2) or (a)(4) commences under Bankruptcy Rule 4007. There is no similar rule with respect to conversion from Chapter 7 to Chapter 13.10 It stands to reason that if the 60-day period in Bankruptcy Rule 4007 expired during the Chapter 7 case, it would not be revived upon conversion to Chapter 13. This is the logic behind Interim Rule 1019(2), which provides that a new period does not arise if the 60 days expired in an original Chapter 7 case that was converted to Chapter 13 and then reconverted to Chapter 7. If conversion from Chapter 13 to Chapter 7 followed by reconversion to Chapter 13 is a possibility, a new opportunity to object to the dischargeability of debt under Bankruptcy Rule 4007 should arise after reconversion to Chapter 13 unless that period expired during the Chapter 7 case.
1 See 11 U.S.C. § 706(a), discussed in §§ 324.1 [ Procedure ] § 148.1 Procedure and 325.1 [ Absolute Right of Debtor? ] § 148.2 Absolute Right of Debtor?.
2 11 U.S.C. § 1307(a).
3 11 U.S.C. § 1307(b).
4 11 U.S.C. § 706(a), discussed in § 531.1 [ Application of § 707(b) Abuse Test at Conversion ] § 142.3 Application of § 707(b) Abuse Test at Conversion.
5 Some will conclude that dismissal for abuse is always discretionary under 11 U.S.C. § 707(b)(1) (“the court . . . may dismiss”) (emphasis added).
6 See § 531.1 [ Application of § 707(b) Abuse Test at Conversion ] § 142.3 Application of § 707(b) Abuse Test at Conversion.
7 11 U.S.C. § 706(a).
8 11 U.S.C. § 706(c) (emphasis added).
9 This issue is discussed further in § 544.1 [ Time for Determining Dischargeability of Debt ] § 156.3 Time for Determining Dischargeability of Debt.
10 See § 538.1 [ Conversion to Chapter 13 after BAPCPA ] § 148.4 Conversion to Chapter 13 after BAPCPA.
Advanced Control Solutions, Inc. v. Justice, 639 F.3d 838, 840-41 (8th Cir. May 17, 2011) (Riley, Melloy, Shepherd) (Section 707(b)(1) controls reconversion to Chapter 13 of a case that was previously converted from Chapter 13 to Chapter 7; § 706(a) does not limit the reconversion allowed by § 707(b)(1). "[Section] 707(b)(1) applies with equal force to bankruptcy proceedings that commenced under Chapter 7 as with those converted from Chapter 13. . . . Section 706(a) . . . grants a debtor a limited right to have his bankruptcy proceeding converted to another chapter. . . . In contrast, § 707(b)(1) grants a bankruptcy court the right to dismiss a case or, with a debtor's consent, convert the case to another chapter when abuse is shown. The two provisions speak to two different situations, and § 706(a) does not co-opt the clear grant of authority that the plain language of § 707(b)(1) provides to bankruptcy courts. . . . [T]he bankruptcy court acted pursuant to § 707(b)(1) by forcing Justice to either consent to a reconversion or face dismissal because of the un-rebutted presumption of abuse that arose in his case.").
Gallagher v. Dockery (In re Gallagher), No. CC-13-1368-TaKuPa, 2014 WL 998411, at *4-*5 (B.A.P. 9th Cir. Mar. 17, 2014) (unpublished) (Taylor, Pappas, Kurtz) (At reconversion to Chapter 13 after conversion from Chapter 13 to Chapter 7, a refund received by the debtors during the Chapter 7 case was not property of the Chapter 7 estate and did not become property of the second Chapter 13 estate because it was spent by the debtors before reconversion. The debtors failed to confirm a Chapter 13 plan and converted to Chapter 7. After conversion, the Chapter 13 trustee refunded funds on hand consistent with §§ 348(f)(1)(A) and 1326(a)(2). The Chapter 13 trustee realized that there were unpaid attorney fees from the Chapter 13 case and, by agreement with the Chapter 7 trustee, reconverted the Chapter 7 case to Chapter 13 to seek turnover of the refund and payment of the attorney fees. "At the time they spent the Refund, it was not property of their chapter 7 estate, and no Bankruptcy Code provision prohibited their use of the Refund. . . . Upon reconversion to chapter 13, § 1306 defined property of this second chapter 13 estate. . . . [P]roperty of the second chapter 13 estate could include the Debtors' postpetition earnings and, thus, the Refund. Debtors, however, must have retained some interest in the Refund at the time of reconversion . . . . To the extent Debtors spent the Refund, they no longer held any interest therein. . . . The Refund, which was the Debtors' property during the chapter 7 case and spent by Debtors during the chapter 7 case, did not become property of the reconverted chapter 13 estate because it no longer existed.").
In re Reid, No. 18-21383-LSS, 2019 WL 1004707 (Bankr. D. Md. Feb. 26, 2019) (Simpson) (Reconversion to Chapter 13 after conversion from Chapter 13 to Chapter 7 is permissive but not appropriate in this case. Debtors are not eligible for Chapter 13 because unsecured portion of mortgage debt exceeds debt limitation in § 109(e). Proposed plan is not feasible because debtors cannot afford to cure mortgage default that exceeds $442,000. Debtors have exhausted all good-faith uses of bankruptcy to keep their home.).
In re Hardison, No. 2:06-bk-20225, 2018 WL 4837323 (Bankr. S.D. W. Va. Sept. 30, 2018) (Volk) (In a 12-year-old Chapter 13 case converted to Chapter 7 without a confirmed plan, reconversion is denied because the debtors have done nothing to suggest they can or really want to pay creditors. Debtors made no mortgage payments for 12 years. Debtors failed to comply with numerous court orders to file documents, tax returns and the like. Prepetition briefing was obtained 92 days after the petition. Debtors have insufficient income to cure mortgage arrears but have rejected substantial offers to sell property that would have paid creditors in full.).
In re Marshall, No. 08-16022-JNF, 2018 WL 4560216 (Bankr. D. Mass. Sept. 20, 2018) (Feeney) (Motion to reconvert from Chapter 7 to Chapter 13 filed 10 years after original Chapter 13 petition is denied because no relief is available to debtors. Chapter 13 filed in 2008 was converted to Chapter 7 in 2014 after default in payments. Chapter 7 case was discharged and closed then reopened several years later when trustee became aware of an unscheduled asset—a lawsuit. Debtor then attempted to reconvert to Chapter 13 to wrest control of that unscheduled asset from the Chapter 7 trustee. The Chapter 13 trustee successfully opposed reconversion on basis that § 1329(c) would not allow any modification of defaulted plan after expiration of five-year maximum duration.).
In re Stroud, No. 15-74063-WLH, 2018 WL 3533347, at *4–*5 (Bankr. N.D. Ga. July 20, 2018) (Hagenau) (After conversion from Chapter 13 to Chapter 7 and reconversion to Chapter 13, Chapter 7 trustee is not allowed compensation because no funds were distributed during the Chapter 13 phase for purposes of § 326(a) and no benefit was realized for the estate for purposes of quantum meruit; but attorney for Chapter 7 trustee is allowed a reduced fee for opposing reconversion that is an administrative expense in the Chapter 13 case after reconversion. “The Trustee did not disburse any funds to anyone and in fact never came into possession of any funds. Therefore, any reasonable compensation to which the Trustee would otherwise be entitled would be capped by the distribution of zero and the Trustee would receive no funds. Even if the Court were to follow the cases that permitted a trustee to recover fees on a quantum meruit basis, the Court finds on the facts of this case that the Trustee’s services, while required of him as a trustee, do not rise to the level of providing any substantial benefit to the estate or to the creditors. . . . [T]here could legitimately be some difference of opinion as to whether the Court could reconvert a case from Chapter 7 to Chapter 13 and the Trustee’s opposition to the motion to reconvert was not wholly unfounded. . . . [T]he compensation for attorneys for the Trustee in responding to the motion to reconvert should be reduced . . . which shall be an administrative expense claim in the Debtor’s Chapter 13 case.”).
In re Gwilt, 581 B.R. 508, 509 (Bankr. W.D. Mich. Jan. 31, 2018) (Dales) (Motion to reconvert Chapter 7 case to Chapter 13 is denied in favor of allowing debtors to dismiss and refile Chapter 13. Court cites “procedural confusion and attendant delay and expense” likely to follow from reconversion, assuming court has discretion to allow reconversion.).
In re Yao, 548 B.R. 818, 821-24 (Bankr. D.N.M. Mar. 31, 2016) (Jacobvitz) (Two months after conversion from Chapter 13 to Chapter 7—after 54 payments and only four payments shy of completion of plan—debtor can reconvert to Chapter 13 and pay balance of plan over objection of trustee. Noting that courts do not agree whether reconversion from Chapter 7 to Chapter 13 is permitted, "the Trustee does not object to reconversion to Chapter 13 on the ground that reconversion to Chapter 13 is prohibited per se . . . . [N]othing in 11 U.S.C. § 348 expressly nullifies or voids a confirmation order entered while the case was pending under Chapter 13. Instead, upon conversion from Chapter 13 to Chapter 7, the statutory provisions under Chapter 13 simply no longer apply. . . . Creditors cannot enforce the terms of a confirmed Chapter 13 plan following conversion to Chapter 7, but the plan and the order confirming plan nevertheless still exist. . . . Upon reconversion, the Chapter 13 Trustee is reappointed and 11 U.S.C. § 1327(a) once again becomes applicable to bind the debtor and creditors to the terms of the existing plan that was confirmed before conversion to Chapter 7. . . . After [Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 127 S. Ct. 1105, 166 L. Ed. 2d 956 (Feb. 21, 2007),] a Court may refuse to grant a debtor's motion to convert from Chapter 7 to Chapter 13 under § 706(a) . . . if the debtor's bad faith would prevent him from proceeding under Chapter 13. . . . If reconversion to Chapter 13 is not per se barred, reconversion likewise implicates good faith considerations under the Marrama standard. . . . Here, Debtor's good faith in seeking bankruptcy relief in the first instance has not been questioned. . . . The Debtor filed the Motion to Reconvert within approximately two months . . . and was prepared at that time to pay the full amount of the payments due under the prior confirmed plan. . . . [R]econversion to Chapter 13 does not cause undue prejudice to creditors.").
In re Dahl, No. 14-60024, 2016 WL 104975, at *2-*5 (Bankr. D. Minn. Jan. 8, 2016) (Ridgway) (Reconversion from Chapter 7 to Chapter 13 is not prohibited by § 706(a) but not appropriate in this case because proposed Chapter 13 plan is not feasible. "Courts are split on this issue. Some courts have held that there is no discretion to allow reconversion to a chapter 13 case when it has previously been converted to one under chapter 7. . . . Other courts have permitted reconversion, but only under appropriate circumstances. . . . While [Advanced Control Solutions, Inc. v. Justice, 639 F.3d 838 (8th Cir. May 17, 2011) (Riley, Melloy, Shepherd),] may stand for the general proposition that the Bankruptcy Code does not per se bar a debtor's reconversion to chapter 13, it really doesn't address other possible 'appropriate circumstances' under which a debtor may reconvert to a chapter 13. . . . It would simply be unconscionable for this Court to allow the Debtors to reconvert to chapter 13. Their proposed plan is simply not feasible.").
In re Salley, No. 13-81532, 2015 WL 3880384 (Bankr. M.D.N.C. June 4, 2015) (James) (Reconversion to Chapter 13 from Chapter 7 is within court's discretion; however, debtors offered no specific reason for reconversion.).
In re Simmons, No. 6:11-bk-09983-KSJ, 2014 WL 6808613 (Bankr. M.D. Fla. Dec. 2, 2014) (Jennemann) (Reconversion to Chapter 13 denied when discharge in Chapter 7 case could not be vacated and no cause for conversion was stated; questions but does not decide whether § 706(a) is an absolute bar once case converted under § 1307.).
In re Nelson, No. 13-32469, 2014 WL 1884323, at *5 (Bankr. W.D.N.C. May 12, 2014) (Beyer) (Citing Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 127 S. Ct. 1105, 166 L. Ed. 2d 956 (Feb. 21, 2007), Chapter 7 trustee's motion to reconvert to Chapter 7 denied when conversion to Chapter 13 did not present "atypical" or "extraordinary case" of debtors engaged in fraudulent conduct. Omission of interest in trust and undervaluation of empty lot, while serious, were legitimately explained by debtors. "[I]n Marrama the Supreme Court emphasized the general policy that debtors should be given the opportunity to repay their debts, and that is exactly what these Debtors have proposed to do with a Chapter 13 plan that would repay 100% of allowed general unsecured claims.").
Harris v. Boston Private Bank & Trust Co. (In re Harris), 497 B.R. 652, 665 (Bankr. D. Mass. Aug. 20, 2013) (Feeney) (Bankruptcy court has discretion to permit reconversion to Chapter 13 after conversion to Chapter 7. "'[D]ebtor's circumstances . . . must be closely scrutinized, . . . and the debtor also must establish both good faith and the feasibility of any plan of reorganization.' . . . The rights and obligations of the Debtor and creditors must be fairly balanced with the provisions of Chapter 13 as the backdrop for entitlement to relief." Debtor lacked resources to make plan payments for more than a few months even with contributions from friends and family and multiple amendments to Schedules I and J. Debtor did not establish good faith—she did not explain failure to list property in original case or failure to file tax returns in current case.).
In re Beckerman, 381 B.R. 841 (Bankr. E.D. Mich. Feb. 4, 2008) (Shapero) (After conversion from Chapter 13 to Chapter 7 and in context of evaluating abuse under § 707(b), bankruptcy court has discretion to permit reconversion from Chapter 7 to Chapter 13; accordingly, debtors are eligible for Chapter 13 relief for purposes of abuse analysis under § 707(b).).
In re Livernoche, No. 07-00051, 2007 WL 3406859, at *2-*3 (Bankr. D. Haw. Nov. 7, 2007) (King) (When Chapter 13 case is converted to Chapter 7 and debtors move to reconvert to Chapter 13 in response to a motion to dismiss the Chapter 7 case under § 707(b), the motion to reconvert to Chapter 13 demonstrates that debtors have ability to pay unsecured creditors and supports dismissal of Chapter 7 case as abusive. "[T]he Debtors have the ability to repay some of their unsecured debts through a Chapter 13 plan. Their recent motion to reconvert case to Chapter 13 confirms this ability. . . . This case need not have been converted to Chapter 7. . . . [T]his case will be dismissed as an 'abuse' under Section 707(b)(3)(B).").