Bankruptcy – Dismissal

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U.S. Court of Appeals For the Seventh Circuit

Civil

Bankruptcy – Dismissal

A bankruptcy judge has authority to make an award of fees after dismissal of the bankruptcy proceeding and the consequent revesting of the assets of the debtor’s estate in the debtor.

“There is no novelty to the idea that a court has besides its ordinary jurisdiction a ‘clean-up’ jurisdiction (‘ancillary’ jurisdiction, it is commonly called) to take care of minor loose ends. It is implicit in two of the statutory provisions we cited earlier, 11 U.S.C. § 330(a)(1) and 28 U.S.C. § 1334(b). Most though not all cases recognize that bankruptcy courts have such authority. Compare In re 5900 Associates, Inc., 468 F.3d 326, 330–31 (6th Cir. 2006); In re Taylor, 884 F.2d 478, 481 (9th Cir. 1989), and In re Dahlquist, 751 F.2d 295, 298–99 (8th Cir. 1985), with In re Advanced Computer Technology Act, Inc., 2013 WL 5661203 (D. Puerto Rico Oct. 15, 2013), and Iannini v. Winnecour, 487 B.R. 434, 438–40 (W.D. Pa. 2012). If the bankruptcy judge in this case, realizing that a request for fees would be coming from Wolf, had delayed the bankruptcy, the creditors would as we said have been hurt. So a sensible course of action was to dismiss the bankruptcy and leave for later a determination of how much Sweports owed Wolf. An alternative would have been to lift the automatic stay of suits by creditors of a debtor that is in bankruptcy. The creditors, including Wolf, could then have proceeded with efforts to collect their debts even though the bankruptcy hadn’t yet been dismissed. But there’s no reason why dismissing the bankruptcy and leaving for later a determination by the bankruptcy judge of how much Sweports owed Wolf should be thought an alternative outside the judge’s jurisdiction. The judge suggested no reason—just the bare, formalist conclusion that with dismissal he had lost jurisdiction to do anything further that would be related to the bankruptcy.”

Reversed and Remanded.

14-2423 In re: Sweports, Ltd.

Appeal from the United States Bankruptcy Court for the Northern District of Illinois, Goldgar, Bnkr. J., Posner, J.

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