During Ms. Boykin’s Chapter 13 case, the bankruptcy court held that the claim by the United States arising under the Affordable Care Act ("Obamacare") out of her failure to obtain health insurance was a non-priority penalty and not a tax. While this appeal by the government was pending, Ms. Boykin voluntarily converted her case to Chapter 7, in which all parties agreed there would be no insufficient assets for any distribution to creditors.
The district court held that not only did this voluntary conversion moot the appeal, but that Ms. Boykin’s unilateral action in conversion represented a clear example of where vacatur of the bankruptcy court’s decision was appropriate.
It can be surmised that this case may have been initially filed as a Chapter 13, as such allows a robust claim objection process that is absent in “no-asset” Chapter 7 cases. After winning on this issue in the bankruptcy court, Ms. Boykin had little reason to remain in a Chapter 13 plan (which was never confirmed) and continue to pay towards creditors.
Perhaps better would have been to halt payments, holding any dismissal off, while this appeal was pending and then convert.