Opinion
10-23330
01-11-2022
In Re: Pablo Ramirez, Debtor
Chapter 7
ORDER DENYING MOTION TO WITHDRAW MONEY (DKT. NO. 125)
JAMES R. AHLER, UNITED STATES BANKRUPTCY JUDGE
This matter is before the Court on a motion (the "Motion") filed by the debtor, Pablo Ramirez ("Debtor") requesting the release of unclaimed funds. Debtor originally filed this case under Chapter 13 of the United States Bankruptcy Code but subsequently filed a notice of voluntary conversion to a case under Chapter 7. (Dkt. No. 37). After administrating the non-exempt assets, the Chapter 7 Trustee proceeded to make distributions, pursuant to 11 U.S.C. § 726(a)(2), to the unsecured creditors that had filed timely proofs of claims. This included a distribution pursuant to Claim #3-1 of Fifth Third Bank ("Fifth Third"). Fifth Third, however, did not cash the check the Trustee distributed to it in the amount of $3,110.12. Therefore, as required by 11 U.S.C. § 347(a), on February 10, 2021, the Trustee filed a notice that these funds were being paid into the Court's registry to "[t]he last known address of the person/entity entitled to said check...Fifth Third Bank..." (Dkt. No. 124).
Debtor argues that Fifth Third has abandoned its claim in this case and contends that, under Yoon v. Van Cleef, 498 B.R. 864 (Bankr. N.D. Ind. 2013), he may apply to the Court for the return of the funds the Trustee attempted to distribute. In support of this contention, Debtor alleges that the right to payment of these funds has not been assigned or transferred to any other entity and attached an affidavit to the Motion averring that he is the debtor in this case and that the funds on deposit "were paid by my funds towards Fifth Third Bank." The issue before the Court is whether, in a Chapter 7 proceeding, a debtor is entitled to money distributed to a creditor on account of an allowed claim solely because the creditor did not cash the trustee's distribution check. For the reasons stated herein, the answer is no.
Under 11 U.S.C. § 347(a), the trustee shall stop payment of any check remaining unpaid ninety days after the final distribution under chapter 7, subchapter V of chapter 11, 12 or 13, and such amounts will be paid into the registry fund of the bankruptcy court as unclaimed funds and shall be disposed of under Chapter 129 of Title 28. In re Montalvo, 05-0006917ESL, 2010 WL 5072120, at *1 (Bankr. D. P.R. Dec. 7, 2010). The payment of unclaimed funds and the procedure for their withdrawal is set forth in 28 U.S.C. §§ 2041, 2042. First, 28 U.S.C. § 2041 states:
All moneys paid into any court of the United States, or received by the officers thereof, in any case pending or adjudicated in such court, shall be forthwith deposited with the Treasurer of the United States or a designated depositary, in the name and to the credit of such court. This section shall not prevent the delivery of any such money to the rightful owners upon security, according to the
11 U.S.C. § 2041 (emphasis added). While § 2042 provides:agreement of parties, under the direction of the court.
No money deposited under section 2041 of this title shall be withdrawn except by order of court.
In every case in which the right to withdraw money deposited in court under section 2041 has been adjudicated or is not in dispute and such money has remained so deposited for at least five years unclaimed by the person entitled thereto, such court shall cause such money to be deposited in the Treasury in the name and to the credit of the United States. Any claimant entitled to any such money may, on petition to the court and upon notice to the United States attorney and full proof of the right thereto, obtain an order directing payment to him.28 U.S.C. § 2042 (emphasis added).
The key terms courts have distilled from the foregoing statutory provisions are "rightful owner", "entitled to", and "full proof of the right thereto." In re Pickett, 632 B.R. 78, 83 (Bankr. E.D. Cal. 2021). The unclaimed funds deposited by the trustee in the court's registry fund are held in trust for the person legally entitled to the same. In re Montaluo, 2010 WL 5072120, at *1 (citing In re Parker, 400 B.R. 55, 59 (Bankr. E.D. Pa. 2009)). Courts determining the right to claim ownership of such funds on deposit require a clear showing that the claimant is entitled to the funds and have held that funds on deposit with the court may only be distributed to their "rightful owner" and "only the creditor to whom distribution was to be made is the rightful owner of the unclaimed funds." In re Montalvo, 2010 WL 5072120, at *2 (internal citation omitted); In re Rush Hampton Indus., Inc., 379 B.R. 192, 193 (Bankr. M.D. Fla. 2007) (internal citations omitted); see In re Application for Unclaimed Funds, 341 B.R. 65, 69 (Bankr. N.D.Ga. 2005) ("the 'rightful owner' of unclaimed funds paid into the court under § 347(a) is the holder of the proof of claim on account of which the trustee made the distribution."). The petitioner for unclaimed funds has the burden of proof to demonstrate the present entitlement to receive the funds. In re Pickett, 632 B.R. at 85 (internal citations omitted).
Based upon the foregoing, the rightful owner of the funds in question is Fifth Third. Fifth Third is: (1) the creditor identified in Claim #3-1; (2) the claimant to whom the Trustee was authorized to make distribution; and (3) the entity for whom the funds were deposited. Debtor has not satisfied his burden of proof and demonstrated that he is entitled to these funds, in fact, the affidavit attached to the Motion only bolsters the Court's conclusion that these funds are the property of Fifth Third. Although the Court is sympathetic to Debtor's position, a debtor "cannot help [themselves] to the property of a creditor merely because the creditor has not been paying attention." Id. at 84. "Unclaimed funds do not become 'surplus funds' when they are not claimed by a creditor who did not cash the check. The creditor retains a property interest in the unclaimed funds." In re Montalvo, 210 WL 5072120 at *2 (internal citations omitted). In sum, Debtor has not demonstrated that he is the rightful owner of the funds at issue.
Debtor's reliance on Yoon v. Van Cleef, supra, is misplaced. In that case the district court determined that a Chapter 7 Trustee has the authority to file proofs of claims on behalf of creditors that fail to do so timely. Yoon, 498 B.R. at 869. In dicta, the court indicated that in such a circumstance a debtor could subsequently apply for the return of any unclaimed funds; but the court did not suggest in any way that a debtor was ipso facto entitled to them. Therefore, under the facts presented, the Court finds that the Motion should be denied.
In support of this statement, the district court cited to In re Atkins, 343 B.R. 283 (Bankr. M.D. Fla. 2005). In that case the court held that, after notice and lack of objections, a debtor in a Chapter 7 proceeding was entitled to unclaimed funds under equitable principals. However, in support of this conclusion, die Atkins court cited to In re Georgian Villa, Inc., 55 F.3d 1561, 1563 (11th Cir. 1995). Georgian Villa was a proceeding pending under Chapter 11 of die United States Bankruptcy Code and is of limited applicability to cases pending under either Chapter 7 or 13 of the Code. Specifically, 11 U.S.C. § 347(a) does not require the deposit of unclaimed funds to die Court's registry in a non-Subchapter V Chapter 11 proceeding. Rather, § 347(b) provides a specific statutory mechanism for the potential return of unclaimed property to a Chapter 11 debtor.
All of the foregoing is ordered, adjudged, and decreed this 11th day of January 2022 in Hammond, Indiana.