[CLBS] Is CH 7 Trustee entitled to increased equity in converted case?

[Knapp, John R.]

Also check out the recent Wilson opinion out of the Ninth Circuit on the fixing of the value of the homestead exemption as of the date of the filing of the petition, such that the exemption can't be amended to give the debtor the benefit of postpetition appreciation (at least based  on the Washington exemption statute).  http://cdn.ca9.uscourts.gov/datastore/opinions/2018/11/27/17-35716.pdf

John Knapp




John R. Knapp, Jr., P.C.
Partner, Bankruptcy & Creditors' Rights Team Leader

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-----Original Message-----
From: CLBS <clbs-bounces at admws.idaho.gov> On Behalf Of Alexandra Caval
Sent: Thursday, April 4, 2019 12:47 PM
To: Holly Roark <holly at roarklawboise.com>
Cc: Bankruptcy list <clbs at admws.idaho.gov>
Subject: Re: [CLBS] Is CH 7 Trustee entitled to increased equity in converted case?

Unfortunately,  post-petition appreciation goes to the estate. I think in the 9th Circuit the decision is in re Chappell out of the BAP. It's from
2007 but I don't think it's changed. The only defense I could think of outside of tapping an asset like a 401k to cure the arrearage would be to argue that the post-petition payments that debtor was to make directly were not "payments under the plan" under 1328(a). Any motion to dismiss by a trustee would have to be for failure to make payments due under the plan. I would direct you to In re Gibson, a 2018 decision out of the Central District of Illinois (copy attached). There is a split among bankruptcy courts on this issue but I'm not aware of any BAP or Circuit decisions on the issue. Both decisions referenced are attached.

On Thu, Apr 4, 2019 at 12:43 PM Holly Roark <holly at roarklawboise.com> wrote:

> This is a CDCA CH 13 case. We are at the end of the case. Junior
> mortgage submitted statement saying mortgage is not postpetition
> current ($19K). CH
> 13 trustee has filed Motion to Dismiss. Considering converting to CH 7
> to at least get rid of unsecured debt, but house value equity has
> ballooned to about $400K. Is CH 7 Tee entitled to this equity in a
> converted case?
>
>
>
> Other options:
>
> 1.      Dismiss and refile CH 13, but will be 100% plan as opposed to 0%
> plan debtor has been in for 5 years based on equity increase. Bummer.
> 2.      Debtor is looking to modify Jr. mortgage to put postpetition
> arrears
> on end of loan (this has to happen real fast, like within 10 days),
> and see if they will submit revised statement to trustee stating
> debtor is now not in postpetition arrears. Not sure if this is a
> viable option though since technically Debtor did not comply with plan terms.
>
>
>
> Let me know your thoughts.
>
>
>
> Best regards,
>
> HOLLY ROARK
>
> Attorney at Law
>
> Certified Bankruptcy Specialist -
>
> By the State Bar of California Board of Legal Specialization
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Alexandra O. Caval

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alex at cavallawoffice.com




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