Contributed by Elisa Lemmer
A recent decision by the United States Bankruptcy Court for the District of Connecticut, In re Gould, No. 03-51180, 2010 WL 3834344 (Bankr. D. Conn. Sept. 30, 2010), serves as a reminder to debtors seeking to close their chapter 11 cases post-confirmation that payment of amounts owed – even outstanding United States trustee fees – is not a prerequisite to obtaining a final decree.
In Gould, an individual chapter 11 debtor filed an application for a final decree in his chapter 11 case over five years after his plan was confirmed. Because of outstanding litigation, his case had remained open. The United States Trustee opposed the issuance of a final decree claiming, among other things, that the debtor had failed to pay all required post-confirmation quarterly fees.
In reviewing whether the payment of quarterly U.S. trustee fees required pursuant to 28 U.S.C. § 1930(a)(6) was a prerequisite to obtaining a final decree, the court looked to section 350(a) of the Bankruptcy Code, which provides that, after an estate is fully administered, the court may enter a decree closing the case. Bankruptcy Rule 3022 contains a similar directive with respect to chapter 11 cases. The phrase “fully administered,” however, is not defined in the Bankruptcy Code or the Bankruptcy Rules. After reviewing the 1991 Advisory Committee Notes accompanying Bankruptcy Rule 3022 and existing case law, the bankruptcy court in Gould concluded that the phrase “fully administered” was to be interpreted loosely and subject to the court’s discretion. The bankruptcy court found instructive prior cases that held that Bankruptcy Rule 3022 was imbued with flexibility and did not require that a chapter 11 case remain open pending payment of all claims and fees (including U.S. trustee fees). Finding no legal requirement that payment of U.S. trustee fees be made prior to issuing a final decree, the court held the U.S. trustee lacked support for his position that the phrase “fully administered” should be construed as requiring payment of United States trustee fees. Consequently, the court granted the debtor’s motion for a final decree and ordered the debtor’s case to be closed.
Notably, the court did not exempt the debtor from paying the outstanding fees at issue in the case. Instead, the court’s ruling was an administrative one – holding only that the debtor’s chapter 11 case was not required to remain open pending payment of the outstanding fees. And, though not expressly before it, the court also appeared to adopt the view espoused by another court that the payment of all claims required by a plan, likewise, is not a prerequisite for a final decree. Because debtors are required to pay U.S. trustee fees until the issuance of a final decree in their cases, the timing of when a court can issue a final decree is important. The Gould decision suggests that a debtor’s case may be closed sooner than some might think!