669 B.R. 626
Bankr. S.D. Ga.2025Background
- Debtor Carey Macon filed Chapter 13 in July 2009; plan confirmed April 20, 2010; he completed plan payments and received discharge on October 16, 2013.
- Four months after confirmation (Aug. 31, 2010) Debtor sustained a personal-injury claim (the "2010 Claim"); under Eleventh Circuit precedent that claim was estate property.
- Case was closed August 1, 2017; reopened June 26, 2018 by consent order limited to scheduling/settling the 2010 and a 2014 personal-injury claim and directing non-exempt proceeds to the Chapter 13 Trustee.
- The 2010 Claim was administratively dismissed under Georgia’s five-year rule in January 2024; a legal-malpractice claim against former counsel Boykin accrued then and was later settled for $600,000.
- Trustee sought about $40,306 of the malpractice settlement to pay unsecured creditors in full; Debtor moved to exclude the malpractice claim from the estate (or, alternatively, to approve the settlement).
- Court approved the gross settlement, held $41,000 in trust, and ultimately held for Debtor: the malpractice claim and its proceeds are not estate property for Trustee to force into the plan.
Issues
| Issue | Plaintiff's Argument (Debtor/Trustee) | Defendant's Argument (Trustee/Debtor) | Held |
|---|---|---|---|
| 1) Is the malpractice claim (accruing Jan. 2024) property of the Chapter 13 estate? | Debtor: No — claim arose after estate ceased to accumulate post‑closure; Georgia law created the claim only in 2024. | Trustee: Yes — derivative/continuation of the 2010 Claim (an estate asset under Waldron) and thus estate property. | Held: No — §1306(a) ceased to operate when the case closed Aug. 1, 2017; reopening for limited purposes did not revive §1306(a) as to a claim that did not exist in 2018. |
| 2) Can the Trustee capture the malpractice claim under Segal’s "sufficiently rooted" test (i.e., treat a post‑closure malpractice claim as estate property)? | Trustee: Yes — malpractice proceeds are sufficiently rooted in the pre‑confirmation 2010 Claim. | Debtor: No — Segal doesn’t justify expanding estate rights years after discharge/closure, especially in Chapter 13. | Held: No — the court rejects applying Segal here; Segal-based extensions have not been used to reach assets that accrued post‑discharge/post‑closure in Chapter 13. |
| 3) If the malpractice claim were estate property, can the Trustee distribute proceeds to creditors by modifying the confirmed plan now? | Trustee: Could seek modification to distribute settlement proceeds. | Debtor: No — plan payments were completed long ago; §1329 bars modification after completion and time limits prevent extension. | Held: No — §1329(a)/(c) bars modification after plan completion and beyond the statutory time window; modification is time‑barred. |
| 4) Did the Debtor consent (via reopening order or other statements) to turnover of malpractice proceeds? | Trustee: Reopening order and prior statements imply consent / estoppel. | Debtor: No — reopening order covered only the 2010/2014 claims then known; malpractice claim did not exist and Debtor expressly withheld consent. | Held: No — Debtor did not consent to turnover of malpractice proceeds and reopening order cannot be read to cover a nonexistent malpractice claim. |
Key Cases Cited
- Waldron v. Brown (In re Waldron), 536 F.3d 1239 (11th Cir. 2008) (post‑confirmation assets may be estate property under §1306; court endorsed an "estate replenishment" approach and a continuing limited disclosure duty).
- Segal v. Rochelle, 382 U.S. 375 (1966) (postpetition receipts may be estate property if "sufficiently rooted" in the prebankruptcy past).
- Telfair v. First Union Mortg. Corp., 216 F.3d 1333 (11th Cir. 2000) (adopted an "estate transformation" approach: property necessary to execute the plan may remain estate property after confirmation).
- Johnson v. Alvarez (In re Alvarez), 224 F.3d 1273 (11th Cir. 2000) (applied Segal to hold certain postpetition malpractice claims estate property in a Chapter 7 context).
- Harris v. Viegelahn, 575 U.S. 510 (2015) (Chapter 7 estate generally does not include assets acquired after the bankruptcy filing).