I Win. I Win. Trustee Holds Record for Having the Oldest Open Chapter 13 Case

By Helen M. Morris, Chapter 13 Standing Trustee for the Northern and Southern Districts of West Virginia

It really takes so little to make a Chapter 13 Trustee happy—debtor’s counsel using calculators when they draft a plan ($100 for 36 months is NOT $4,936.87 no matter how many times it is repeated); saying “the Trustee is right” distinctly in open court during the course of a hearing; or closing a 1999 (yep 1999, that is not a typo) case after nearly 14 years.

The case in question was filed, apparently, because the debtors, a doctor and her husband, didn’t understand that tricky thing about paying taxes. The pre-petition priority tax liability was large—more than $81,000 to the IRS and about $8,000.00 to the State of West Virginia (and another almost $9,000.00 as unsecured). Not surprisingly, the proposed plan didn’t cash flow. An A.P. to discharge the student loans, moratoria and amendments later, the case was finally confirmed in month 55–for 60 months from confirmation. (The now retired judge often stated that the 60 months set out in the Code was a guideline.)

Who knew that those pesky income taxes were to be paid every year? The State had post-petition tax claims in excess of $34,000.00. The IRS chose not to file 1305 claims in the Chapter 13 case.

The original gross base was eventually met, but the priority claims still weren’t paid. So, after giving the debtors an opportunity to deal with the issues they had created, I filed yet another motion to dismiss—this time alleging that the debtors had failed to complete the plan in 60 months.

At the hearing, debtors’ counsel orally asked the Court for a hardship discharge “because the trustee wants to get rid of this case.”

To which I replied, “Yes, I do; that’s why I filed a motion to dismiss.” I also objected to an oral motion for a hardship discharge.

The hearing was continued, and debtors’ counsel filed a written motion for a hardship discharge for the reason that the debtors had now filed a Chapter 11 case (don’t ask—I have no idea! I didn’t even know a Chapter 11 had been filed until I read the motion for hardship discharge) and would pay their taxes in that case.

Neither holding the pleading up to a mirror nor against the light revealed any hidden messages or codes that provided a legal ground for hardship discharge, so I filed a lengthy objection. The two motions came on for hearing, at which time, the Court took the matter under advisement.

Winter 2012 came with icy roads, and the female debtor was fatally injured in an automobile accident. Since the female debtor was the breadwinner of the couple, I heartlessly waited for a voluntary dismissal of the case. Debtors’ counsel apparently thought I would concede that death gave the couple grounds for a hardship discharge.

In response to his letter about the female debtor’s death, I apologized for being insensitive, but as trustee I needed to know if there were insurance proceeds as a result of the accident as those were property of the estate. Frankly, I fully expected him to dismiss this case. Instead, he asked me what it would take to complete the case.

I gave him a figure that paid the claims in full—and he provided me with a check for that amount—not by return mail but certainly quicker than I had received other payments in the case. So, nearly 14 years after the case was filed, the claims were paid, and I filed a report of completion. I was—briefly–one happy camper.

It took a while to file the final report—just needed one more check to clear. Yes, you guessed it—the small debtor refund based on the difference between my payout figure being calculated on a 10% fee and the actual fee approved by the UST—hadn’t been cashed. I guess some debtors never get in a hurry, but just before it stale-dated, the surviving debtor negotiated the check.

The moral of this story: Patience is a virtue? No one would say that I’ve been patient with this case. All good things come to him/her who waits? Well, I did get a fee on the distribution and unsecured creditors who probably had written off their claims sometime before confirmation (a decade ago!) were paid in full. However, the debtors paid off taxes—some dating back to 1995—without interest and since we used to pay attorney fees at 4% of the plan payments, debtors’ counsel got an extra fee—so he benefitted from their stall and delay tactics (which I don’t think is a good thing).

I certainly do not believe that having had the distinction (infamy) of having the oldest open Chapter 13 case in the United States is a good thing.

No, the point of my saga is this: this case IS closed and I beat the 14th anniversary of its filing—albeit only by a couple of months!

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Helen M. Morris has been the Chapter 13 trustee for the Northern and Southern Districts of West Virginia since October 1, 1996. Prior to her appointment, she was in private practice in Huntington, WV, where she served as a Chapter 7 panel trustee in addition to representing both debtors and creditors in bankruptcy matters; but not in the same case. She has a Bachelor’s degree from Marshall University in Huntington, WV, and her law degree from Vanderbilt University School of Law in Nashville, TN.