In re Belcher, 06-71448.

• Decision Date: 02 June 2009
• Docket Number: No. 06-71448.,06-71448.
• Citation: 410 B.R. 206
• Parties: In re Billy E. BELCHER, Jr., Jane I. Belcher, Debtors.
• Court: U.S. Bankruptcy Court — Western District of Virginia

410 B.R. 206

In re Billy E. BELCHER, Jr., Jane I. Belcher, Debtors.

No. 06-71448.

United States Bankruptcy Court, W.D. Virginia, Roanoke Division.

June 2, 2009.

A. Carter Magee, Jr., William J. Charboneau, Magee, Foster, Goldstein & Sayers, Roanoke, VA, for Debtors.

REVISED MEMORANDUM DECISION

WILLIAM F. STONE, JR., Bankruptcy Judge.

The matters before the Court are the Debtors' Motion for Entry of an Order Granting the Debtors a Discharge or, in the Alternative, Waiving the Quarterly Fee ("Motion for Discharge"), the objection thereto filed by the office of the United States Trustee, and the Debtors' Final Report and Application for Final Decree ("Motion for Final Decree"). A hearing on said matters was held on April 27, 2009. The primary issue raised by these motions is whether, in light of the changes to the Bankruptcy Code through the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA") of 2005, an individual chapter 11 debtor may obtain a discharge after a Chapter 11 Plan of Reorganization has been confirmed, but prior to completion of such debtor's obligations under such Plan, in short, an "early" discharge. This issue is a matter of first impression before this Court, and, given the novelty of the issue and apparent scarcity of authority directly addressing the questions presented, the Court took the matter under advisement. Based on the following analysis, the Court concludes that Congressional intent is best served by denying both of the Debtors' motions.

FINDINGS OF FACT

The facts of the case presently before the Court are not in dispute. The Debtors filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code along with their supporting schedules on November 30, 2006. Based on the supporting schedules filed, the chapter 7 trustee filed a No Asset Report on February 8, 2007, signaling that under a chapter 7 liquidation, no funds would have been available for distribution to the unsecured creditors.¹ On August 31, 2007 the Debtors filed a Motion to Convert Case, seeking to convert their case from one under chapter 7 to one under chapter 11.² The Court granted this Motion to Convert by Order entered September 25, 2007. After conversion, the Debtors managed their properties as debtors-in-possession under 11 U.S.C. §§ 1007 and 1108. The Debtors filed a Disclosure Statement and Chapter 11 Plan of Reorganization on January 31, 2008. The Disclosure Statement was conditionally approved by Order entered February 1, 2008. Per the provisions of that Order, such approval become final on February 29, 2008, the deadline for filing any objections thereto. An Amended Plan, containing only non-material modifications, was subsequently filed on March 5, 2008. The Debtors' Plan was then confirmed by Order entered March 11, 2008.

The confirmed Plan requires the Debtors to pay their disposable income of $2,003.60 per month into a Distribution Fund created by the Plan for a period of sixty months after the effective date, which was March 22, 2008. The Debtors are to pay their administrative claims and priority claims, including the statutory quarterly fees to the United States Trustee pursuant to 28 U.S.C. § 1930(a)(6), either directly with cash or through funds available from the Distribution Fund. The Plan also requires the Debtors to pay the two secured claims of Wachovia Bank and the one secured claim of First National Bank directly.³ The Plan requires that payments to be applied to the arrearage claim of First National Bank be made through the Distribution Fund. Finally, the Plan requires that payments be made pro rata through the Distribution Fund to the unsecured creditors, whose claims in the aggregate total $501,548.17. The Debtors' student loan creditors will also share in this pro rata distribution over the life of the plan. However, once all distributions have been made from the Distribution Fund, the Debtors will then assume regular contractual payments to their student loan creditors.⁴ Additionally, the Debtors did not seek an early discharge through the terms of their confirmed Plan. In fact, the only discussion of a discharge in the Plan itself is found in Section 8.1.1 of the Plan, which states that "The terms of the Plan shall be binding upon the Debtors . . ., and the Debtors will be eligible for a discharge of dischargeable debts in accordance with 11 U.S.C. § 1141(d)." No indication was made regarding the timing of the discharge. However, the Plan does include, in Section 8.1.4, language noting the following:

On the date the Reorganized Debtors make the 60th and final payment due to the Distribution Fund, and except as otherwise expressly provided in the Discharge Order issued by the Court, all persons who have held, hold, or may hold dischargeable Claims against the Debtors are, with respect to any such dischargeable Claim, permanently enjoined from taking [any actions related to the enforcement or collection of such claims].

Accordingly, the terms of the confirmed Plan, while never expressly discussing the timing of discharge, seem to imply that such discharge would not be requested until after completion of any payments under the Plan required to be made from the Distribution Fund. Additionally, Section 1.4.2 of the Debtors' Disclosure Statement states: "Unless a discharge is sooner granted, upon completion of the 60th monthly payment required by the Plan, the Debtors will be granted a discharge." Thus, this Court finds that the Disclosure Statement and Plan, read together, contemplate that discharge would not occur until completion of all payments to and distributions from the Distribution Fund have been made.

On December 4, 2008, approximately nine months after confirmation of this Plan, the Debtors filed their Motion for Final Decree in which the Debtors aver that the Plan of Reorganization has been substantially consummated within the meaning of 11 U.S.C. § 1101(2) and request that the Court issue a Final Decree closing the case pursuant to 11 U.S.C. § 1106(a)(7). In the Final Report accompanying the Motion, the Debtors note that, as of the date of its filing, they had paid $9,491.93 to counsel for the Debtors and $650 to the United States Trustee to satisfy their quarterly fees. The Final Report also notes that the Debtors had paid $7,701.84 and $3,469.79 upon the Wachovia claims and $675.84 upon the claim of First National Bank. Finally, the Report notes that the Debtors had paid $2,003.60 to the unsecured creditors. According to the Final Report, as of the date of the filing of the Motion for Final Decree, all creditors had been paid what had been required to that date under the terms of the confirmed Chapter 11 Plan or more. According to the terms of the Plan, however, as of the date the Motion for Final Decree was filed, the Debtors remained obliged to make fifty-one more monthly payments into the Distribution Fund.

The initial hearing on the Motion for Final Decree was held February 23, 2009, but was continued at the request of the Debtors for the purpose of filing a motion seeking early discharge. On April 13, 2009, the hearing on the Motion for Final Decree was continued again to give the United States Trustee adequate time to determine whether the granting of an early discharge was supported by law. The Debtors filed their Motion for Discharge on March 20, 2009, and the United States Trustee filed an Objection thereto on April 22, 2009. At the conclusion of the hearing held on the Motion for Final Decree, the Motion for Discharge, and the United States Trustee's Objection, the Court, upon the request of the United States Trustee, allowed the parties the discretion to file briefs in support of their respective positions. The United States Trustee on May 4, 2009 filed a post-hearing memorandum opposing the Debtors' Motion for Discharge, to which the Debtors filed a brief in response on May 12, 2009.

During the hearing, counsel for the Debtors, upon questioning by the Court, represented that the quarterly fees paid to the United States Trustee were estimated to amount to $650 per quarter for the remainder of the plan. According to the Motion for Final Decree and Final Report, only $650 of quarterly fees had been paid as of the date of its filing on December 4, 2008. Such amount would have satisfied the first quarter, ending June 30, 2008, after the Plan's effective date of March 22, 2008. This amount is in accord with the provisions of 28 U.S.C. § 1930(a)(6) which sets the quarterly fees paid at $650 per quarter so long as the aggregate disbursements in such quarter total more than $15,000 but less than $75,000.⁵ Based upon the information provided in the Debtor's Post-Confirmation quarterly reports, this Court finds that the quarterly fee paid to the United States Trustee in this case under the currently applicable rate is $650 per quarter for a total of $13,000 during the five-year period in which disbursements are to be made through the Distribution Fund.

CONTENTIONS OF THE PARTIES

In their Motion for Final Decree, the Debtors aver that they had commenced making distributions as required under the confirmed Plan of Reorganization. Therefore, the Debtors concluded that the Plan had been substantially consummated within the meaning of 11 U.S.C. § 1101(2). The Debtors subsequently filed a Motion for Discharge, in which they assert that prior to BAPCPA a chapter 11 debtor received a discharge upon confirmation of the debtor's plan, thereby allowing the debtor to move for the entry of a final decree closing the case. The Debtors observed that the entry of a final decree would end their obligation to pay quarterly fees to the United States Trustee. The Debtors, noting that all administrative claims as well as the claim of First National Bank had been paid in full, argue that they have substantially consummated the Plan, and they seek the entry of a discharge order so that they can move forward with their Motion for Final Decree. The Debtors...