![]() The Debtor argued that section 349, titled “Effect of Dismissal,” requires return of the Funds to the Debtor because it provides that dismissal of a case “reverts the property of the estate in the entity in which such property was vested immediately before the commencement of the case under this title.” The Debtor and the Trustee based their arguments in favor and in opposition of the motion, respectively, on two different Bankruptcy Code sections - sections 3. Despite the Trustee’s objection to the motion, the Court granted the Debtor’s motion after conducting an analysis of what a Chapter 13 trustee must do with funds following dismissal of a case after confirmation of a plan and based upon a recent U.S. The Debtor then filed a motion to compel the Trustee to recoup the funds and disburse them to the Debtor. The Trustee subsequently disbursed the Funds to four of the Debtor’s unsecured creditors. At that time the Trustee had funds on hand in the amount of approximately $16,000 (the “Funds”). The Court entered an order dismissing the case. She resolved the default, and began making payments again, but eventually fell behind, at which time she filed a motion requesting a voluntary dismissal of her case. The Debtor made plan payments, but after a period of time defaulted. ![]() The Court confirmed a plan pursuant to which the Debtor would retain her residence and make monthly payments to the Trustee in the amount of $8,500.75 for 60 months. In this case, the Chapter 13 debtor (the “Debtor”) owned a residence with significant equity. ![]() What happens to funds held by a Chapter 13 trustee (the “Trustee”) in the event that a Chapter 13 debtor dismisses her case voluntarily? That’s the question that was addressed by the United States Bankruptcy Court for the Eastern District of Michigan (the “Court”) in a recent opinion. JChapter 13 Trustee Must Return Funds to Debtor Following Dismissal of Case
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