by Peter Jakey–Managing Editor
A 1980 Rogers City High School graduate is preparing to present a case before the United States Supreme Court, both as a party to the case and as co-counsel. The case is Harris v. Viegelahn.
Mary Kathryn Viegelahn is an attorney and Chapter 12 and Chapter 13 Trustee from San Antonio, Texas.
From a humble beginning to the highest court in the land. She is the daughter of Howard and Kathleen (O’Toole) Viegelahn. Having had the privilege to grow up on the family farm located just outside Rogers City, as the youngest of six children, with her five brothers, who all reside in Rogers City: John, David, Howard, Ralph and Mark.
She is one of only 200 Chapter 13 trustees in the country. Trustees are appointed by the U.S. Department of Justice Office of the U.S. Trustee as independent contractors.
Mary Kathryn Viegelahn is currently the Chapter 13 trustee in San Antonio where she has her office and has 25 employees. She was appointed to this position in 2010. Last year she disbursed approximately $48 million to creditors with a caseload of 5,995 pending cases. She has been an attorney since 1989 and was first appointed as a Chapter 13 trustee April 1, 2000 for the Western District of Michigan located in Kalamazoo. She eventually assumed two additional trusteeships in Michigan before leaving for San Antonio. She was also appointed as Chapter 12 Trustee for San Antonio in 2010.
The justices agreed to weigh in on whether undistributed funds held by a Chapter 13 trustee go to creditors or back to the debtor once the bankruptcy is converted to from Chapter 13 to Chapter 7, an issue that has split the 1st Circuit and 5th Circuit Courts of Appeal for the last couple of years and has divided bankruptcy courts for 30 years.
The Supreme Court receives approximately 10,000 petitions for certiorari each year, but less than 100 are selected to be heard.
“The odds of a case being heard are slim,” said Mary.
Charles E. Harris III filed for Chapter 13 bankruptcy in 2010 after he fell behind on his mortgage and owed approximately $20,000 to unsecured creditors. He agreed to pay $530 a month as a Chapter 13 plan payment to Mary for payment to his creditors.
In November 2010, Chase terminated the automatic stay as to the Harris’ home for his failure to make the mortgage payments. At that point, Mary held a portion of the monthly payments intended to go to Chase for the pre petition mortgage arrears waiting to see if Chase and Harris would reach an agreement that might allow Harris to keep his home.
After several months Harris voluntarily converted his bankruptcy case to Chapter 7 and Mary distributed those funds to Harris’ remaining creditors. Harris sued for that money and argued that Mary had no authority to disburse funds after conversion of the case.
The Bankruptcy Court issued an order compelling the return of the funds. Viegelahn appealed the decision to the U.S. District Court and the Court affirmed the decision of the Bankruptcy Court. Mary appealed the decision of the U.S. District Court and; the U.S. Court of Appeals for the 5th Circuit reversed and held that the undistributed payments that the Chapter 13 trustee holds at the time of the case’s conversion to Chapter 7 must be distributed to creditors pursuant to the Chapter 13 plan.
“The debtor filed the petition with the Supreme Court asking that it hear the case,” said Mary. “There is a split in the Circuits which is often a basis for the court to accept to hear a case.”
(Complete version of this story is published in the March 12, 2015 edition of the Presque Isle County Advance)