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October 11, 2007

Effect of Chapter 11 Post-Plan Confirmation Conversion to Chapter 7 on New Creditors?

I have a friend who represents a creditor.  The creditor seems to be screwed by Section 348.  What am I missing?

  • Individual debtor filed chapter 11 pre-BAPCPA,
  • Chapter 11 Plan was confirmed transferring all assets to himself as reorganized debtor,
  • Confirmation Order says if case is subsequently converted to chapter 7, all assets of the estate return to the estate,
  • Debtor of course ignores the confirmed plan and two years later the case is converted to chapter 7 pursuant to Section 1112,
  • Creditor is a post-confirmation creditor,
  • Section 348(d) says creditor's claim is treated as if it was pre-petition,
  • Section 541(a)(6) says proceeds of property of the estate other than earnings of the individual are property of the estate, Section 541(a)(7) says property acquired by the estate is property of the estate.

It appears then that the debt is discharged but property acquired by this bad guy after confirmation of the plan cannot be taken by the chapter 7 trustee.  The debtor gets to keep it, no matter how much it is, but all the debts go away.

Can this be right?  what am I missing?

October 11, 2007 | Permalink

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