In Harris v. Viegelahn, ––– U.S. –––, 135 S. Ct. 1829, 191 L. Ed. 2d 783 (2015), the United States Supreme Court concluded any undisbursed postpetition earnings must be returned to the debtor upon conversion from Chapter 13 to Chapter 7 under 11 U.S.C. § 1307(a), absent finding of bad faith under 11 U.S.C. § 348(f)(2). In Harris, the debtor had confirmed a Chapter 13 plan and then sought conversion to Chapter 7.
The issue before this Court was whether allowed administrative expense claims pursuant to 11 U.S.C. §§ 503(b) and 1326(a)(2) may be paid from undisbursed postpetition earnings upon the pre-confirmation conversion of a case from Chapter 13 to Chapter 7. Ultimately, this Court agreed with, joined and adopted the growing post-Harris majority position. In summary, the Court determined Harris applies equally to cases converted from Chapter 13 to Chapter 7 both after confirmation and prior to confirmation. The Court held absent bad faith conversion, allowed administrative expense claims may not be paid from undistributed postpetition earnings, rather those undisbursed earnings must be returned to the debtor upon conversion.