Giving to Creditors What Creditors Are Due: Why Chapter 13 Trustees Should Distribute Any Post-Confirmation Funds Held at Dismissal to the Debtor’s Creditors

Abstract

In 2018 there were almost three hundred thousand petitions filed under Chapter 13 of the Bankruptcy Code. But of this number fifty-five percent of these cases were dismissed. When the Chapter 13 trustee is holding funds yet to be disbursed at dismissal, a split in authority exists. Should the trustee distribute these funds to the debtor, because the Chapter 13 case ceases to exist? Or should the trustee disburse these funds to the debtor’s creditors according to the Chapter 13 plan? This Article argues that the latter approach is the one which should be adopted by all courts. A majority of courts disagree, but this Article argues that the applicable bankruptcy code provisions, legislative history, policy, and canons of statutory construction favor distributing any funds held by the trustee at dismissal to the debtor’s creditors.