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Williams v. Marshall

United States District Court, N.D. Illinois, Eastern Division

April 11, 2014

RONALD L. WILLIAMS and, DANA M. MORGAN-WILLIAMS, Plaintiffs/Appellees,
v.
MARILYN O. MARSHALL, Chapter 13 Trustee, Defendant/Appellant Adv. No. 11 A 2415. Bankr. No. 08 B 31707.

For Marilyn O Marshall, Standing Trustee, Appellant: Onofrio Anthony Olivadoti, LEAD ATTORNEY, Office of Chapter 13 Trustee, Chicago, IL; Stewart A Chapman, Office of Chapter 13 Trustee Marshall, Chicago, IL.

For Ronald L Williams, Dana M Morgan-Williams, Appellees: Jonathan D. Parker, LEAD ATTORNEY, Dale Allen Riley, Kristin Kathleen Beilke, Nathan E. Curtis, Geraci Law, L.L.C., Chicago, IL; Justin Robert Storer, Law Offices of Peter Francis Geraci, Chicago, IL.

Page 696

OPINION AND ORDER

Joan H. Lefkow, Judge.

This bankruptcy appeal raises a discrete question of law: What does the Bankruptcy Code require a Chapter 13 trustee to do with undistributed funds received pursuant to a confirmed Chapter 13 plan when the Chapter 13 case is dismissed? The bankruptcy court held that the trustee is obligated to return the funds to the debtor. For the reasons stated below, the court affirms the decision of the bankruptcy court.[1]

BACKGROUND

The facts are uncontested. Ronald Williams and Dana Morgan-Williams filed for relief under Chapter 13 on November 20, 2008. Marilyn Marshall was assigned to the case as the Chapter 13 trustee (" the Trustee" ). On February 3, 2009, the bankruptcy court confirmed a plan that required the Williamses to pay the Trustee $4,625 per month for sixty months. The payments were made via payroll deductions.

The Williamses voluntarily dismissed their bankruptcy case on September 26, 2011. In total, they paid $155,879.58 to the Trustee prior to the dismissal. The Trustee distributed $136,770.12 to creditors as required by the plan but approximately $16,868.24 had not yet been distributed at the time of the dismissal.

On November 15, 2011, the Williamses commenced an adversary proceeding against the Trustee seeking return of the funds she held. On February 9, 2012, the Williamses moved for judgment on the pleadings in the adversary proceeding and, on March 13, 2013, the bankruptcy court granted judgment in favor of the

Page 697

Williamses. See Williams v. Marshall (In re Williams), 488 B.R. 380 (Bankr. N.D.Ill. 2013). The Trustee appealed.

ANALYSIS[2]

The legal question raised by this appeal arises from the interplay between two statutory provisions. On one hand, section 1326 of the Bankruptcy Code, 11 U.S.C. § § 101 et seq., requires a Chapter 13 trustee to distribute payments it receives from the debtor to creditors as set forth in the plan. 11 U.S.C. § 1326. The Trustee argues that it is obligated under this section to distribute the funds it held at the time of dismissal as provided in the plan. On the other hand, section 349(b)(3) of the Bankruptcy Code provides that dismissal of the case " revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case[.]" 11 U.S.C. § 349(b)(3). The Williamses argue that the voluntary dismissal of their case triggered section 349(b)(3) and thus the ...


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