Not so fast debtor!

Not so fast individual Chapter 11 debtor’s counsel! You might need a few days before reopening the case and discharging an individual chapter 11 debtor.

Before I start, you should know this is the kind of case only a civil and bankruptcy procedure nerd would love, which is precisely the category I fall in. And it’s definitely of interest to a small percentage of the bankruptcy bar. 

Today’s post and podcast is about In re Hill out of Southern District of Florida, Fort Lauderdale Division, 13-18344-PDR, filed yesterday on November 23. It’s an individual Chapter 11 case, which are pretty rare, although I got a unique opportunity to get exposed to them when I was clerking in bankruptcy in Arizona during the Great Recession.

As is fairly common, the case was temporarily closed while the debtor was making payments. This is a fairly common practice to avoid hefty quarterly United States Trustee payments.

Bankruptcy courts have routinely approved the practice in confirmed individual chapter 11 cases of administratively closing the case while the debtor makes payments under the plan progressing towards earning a discharge. This practice, approved by the United States Trustee, benefits the estate because the debtor need not bear the expense of filing operating reports or paying quarterly UST fees. In this case, after having made all plan payments, the Debtor seeks to simultaneously reopen the case, have his final report approved, obtain a discharge, and close the case all on the same date and in doing so avoid having to file operating reports and paying the associated UST fees. 

The debtor in this case got to the end of the payments, so he moved to reopen the case and obtain a discharge. 

The catch in this case is that he was trying to get all the relief on the same day: reopen the case and get a discharge. 

The US trustee objected because the creditors couldn’t object while the case was closed. 

The court agreed and ruled the case could be reopened but that the discharge hearing would have to wait until the creditors had thirty days to object. 


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