Opinion
21-10523
08-31-2022
IN THE MATTER OF: STEVEN CROGHAN ASHLEE L. CROGHAN Debtors
NOT INTENDED FOR PUBLICATION
DECISION AND ORDER OVERRULING OBJECTIONS TO CLAIMS
Robert E. Grant Chief Judge, United States Bankruptcy Court
This case began under chapter 7. On August 9, 2021, the debtors received a discharge. About two months later, on October 5, 2021, the debtors moved to convert the case to chapter 13. See, 11 U.S.C. § 706(a) (a debtor may convert from chapter 7 to chapter 13 at any time). There were no objections to the request, the motion was granted and the case converted to chapter 13. Since then, the debtors have confirmed a plan which will provide a distribution to unsecured creditors. They have now objected to two claims - Claim No. 1 filed by Forum Credit Union and Claim No. 5 filed by Kohls. The basis for both objections is that the discharge they received in this case prior to conversion discharged any obligation they had to those creditors, and so their claims should be denied. Although neither creditor responded, see, N.D. Ind. L.B.R. B-3007-1, the court scheduled the objections for a hearing to consider whether "the discharge issued on August 9, 2021, prior to conversion, has any effect on the allowability of those claims." Notice of Hearing, June 23, 2022. See, In re Taylor. 289 B.R. 379, 384 (Bankr. N.D. Ind. 2003) ("an objection to a proof of claim must allege facts which, if accepted as true, would trigger one of the statutory reasons for denying a claim. If it does not, the objection should not be sustained . . . even if the creditor lacks sufficient interest to respond."). That is the issue presently before the court.
While the proposition Debtors advance - that a chapter 7 discharge issued in a case which is subsequently converted to chapter 13 leads to the denial of claims filed in that very same case -may seem surprising, there are decisions supporting the argument. See e.g.. In re Marcakis, 254 B.R. 77, 82-83 (Bankr. E.D. N.Y. 2000); In re Lesniak. 208 B.R. 902, 906 (Bankr. N.D. 111. 1997); In re Schwartz. 178 B.R. 340, 344-45 (Bankr. E.D. N.Y 1995); In re Saflev. 132 B.R. 397, 399-400 (Bankr. E.D. Ark. 1991); In re Jones. Ill. B.R. 674, 680 (Bankr.E.D.Tenn. 1990); In re Alcantar. 2021 WL 4192680 *4 (Bankr. N.D. 111. 2021). But, none of them actually involve objections to claims. Instead, they all address post-discharge motions to convert from chapter 7 to chapter 13 and use the discharge as a reason why conversion should not be permitted. Furthermore, their statements to the effect that the chapter 7 discharge operates to discharge claims if the case is converted to chapter 13 is "a conclusion of law that is based more on citation to each other's decisions than on any critical analysis of the Code . . .." In re Carrow, 315 B.R. 8, 21 (Bankr. N.D. N.Y. 2004).
A simple reference to the Bankruptcy Code's provisions concerning claims (§ 502) and the effect of conversion (§ 348) answers the question before the court. Claims are deemed allowed unless objected to. 11 U.S.C. § 502 (a). If an objection is filed, the court is to determine the amount due "as of the date of the of the petition" and allow the claim in that amount. 11 U.S.C. § 502(b) (emphasis added). Conversion of a case from one chapter to another "does not effect a change in the date of the filing of the petition." 11 U.S.C. § 348(a). So, the operative time for determining the enforceablity of a creditor's claim is the date of the petition, which is the date the case is filed. That date is not changed by the conversion from 7 to 13. Since the date of the petition predates any subsequent discharge, the issuance of a discharge is not relevant to the allowance of claims in the same case, even if it is converted from one chapter to another. "Creditors with valid claims against the bankruptcy estate on the date the bankruptcy petition is filed do not lose them simply because the debtor is granted a discharge or the case is converted to another chapter." In re Mosbv. 244 B.R. 79, 87 (Bankr. E.D. Va. 2000). See also. In re Pike. 622 B.R. 898 (Bankr. S.D. 111. 2020); In re Agresta. 2000 WL 1639570 *2 (Bankr. M.D. 2000) (The original date of filing for relief under chapter 7 is the measuring point for creditor's claims when a case is converted to chapter 13.); In re Carter. 285 B.R. 61, 68 (Bankr. N.D.Ga. 2002).
The debtors' objections to the claims filed by Forum Credit Union and Kohls do not challenge the validity of those debts or question the amount due as of the date of the petition. They are, therefore, OVERRULED.
SO ORDERED