Memorandum of Decision Re: Violation of Stay

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Decisions
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re JOHN and JOANN FREEMAN,                                                                                       No. 92-12224              Debtor. ___________________________/ JOHN and JOANN FREEMAN,              Plaintiffs,       v.                                                                                                                              A.P. No. 97-1140 JOSEPH HALLIGAN,              Defendant. ______________________________/
Memorandum of Decision
     Debtors John and Joann Freeman filed a Chapter 11 petition in 1992. Their Chapter 11 plan was confirmed in 1993. On March 14, 1997, on motion of the U.S. Trustee, the court found that the debtors had failed to consummate their plan and converted the case to Chapter 7.      On April 10, 1997, defendant Joseph Halligan filed suit in state court against the Freemans seeking to enforce their promissory note. On May 9, 1997, he obtained a judgment. On June 9, 1997, the Freemans instituted this adversary proceeding to enforce their rights under the Bankruptcy Code. These facts are undisputed, and the matter is now before the court for summary adjudication.      The parties are arguing over the interpretation of the Code when a case is converted from Chapter 11 to Chapter 7 after a plan has been confirmed. The Freemans argue that Halligan violated the automatic stay when he sued them to collect on the note. Halligan argues that he is free to enforce the note because the debt arose post-confirmation. Both sides have got it wrong.      Section 1141(d)(1)(A) of the Code provides that confirmation discharges the debtor. Section 362(c)(2)(C) provides that in a Chapter 11 case the automatic stay terminates when the debtor is discharged. Conversion of a case does not reinstate the automatic stay. In re Campos, 128 B.R. 791, 792 (Bkrtcy.C.D.Cal. 1991), and cases therein cited. Halligan cannot have violated the automatic stay because there was none. The primary case relied upon by the Freemans, In re Hines, 198 B.R. 769 (9th Cir. BAP 1996), is not relevant because that was a Chapter 13 case. In Chapter 13 cases, debtors do not receive a discharge until they successfully complete their plan.      On the other hand, section 348(d) of the Code provides that a debt which arose after filing but before conversion is treated for all purposes as if it were a prepetition claim. The Freemans were entitled to a Chapter 7 discharge (see 7 Collier on Bankruptcy (15th Ed. rev.), para. 1112.02[6], p. 1112-14.) and such a discharge was in fact issued on August 7, 1997. By operation of section 348(d), the Freemans' debt to Halligan is subject this to discharge.      For the foregoing reasons, the court will not award damages but will issue a permanent injunction barring further collection activities by Halligan unless his claim has been determined to be nondischargeable. Each side shall bear its own costs and attorneys' fees. A judgment so providing shall be entered.
Dated: October 28, 1997                                                                                        _______________________                                                                                                                              Alan Jaroslovsky                                                                                                                              U.S. Bankruptcy