135 S. Ct. 1829 (2015)
Harris v. Viegelahn is a seminal Supreme Court case that addressed the distribution of funds held by a Chapter 13 trustee after a debtor converts to Chapter 7 bankruptcy.
Does a Chapter 13 trustee have the authority to distribute funds collected post-petition to creditors after a debtor converts to Chapter 7, or must these funds be returned to the debtor?
Under the Bankruptcy Code, when a debtor converts from Chapter 13 to Chapter 7, undistributed postpetition wages held by the Chapter 13 trustee at the time of conversion should be returned to the debtor, not distributed to creditors.
The Supreme Court held that undistributed funds held by a Chapter 13 trustee at the time of conversion to Chapter 7 must be returned to the debtor.
This case is pivotal for law students and practitioners in understanding the debtor's rights to undistributed funds upon converting from Chapter 13 to Chapter 7. It emphasizes the difference in treatment of post-petition wages between the two chapters and reinforces the debtor's right to reclaim such funds upon conversion. Furthermore, it highlights the limits of a trustee's power in maintaining and distributing a debtor's estate during the conversion process, ensuring that the Code's intention to provide a fresh start to the debtor is upheld.