547 B.R. 362
Bankr. D. Idaho2016Background
- Debtors obtained a Wells Fargo mortgage in 2007 and filed chapter 7 in December 2009. The court granted Wells Fargo relief from stay to foreclose in 2010 and the case was closed in 2011.
- In 2011 Wells Fargo entered a federal Consent Order resolving regulator claims about its 2006–2008 lending practices and agreed to make remedial payments to certain borrowers; Wells Fargo did not admit wrongdoing.
- Debtors were identified as eligible for a remedial payment under the Consent Order; they did not schedule any claim for such payment in their 2009 bankruptcy.
- U.S. Trustee moved to reopen the case in 2015; a chapter 7 trustee was appointed and negotiated an $8,120.23 payment from Wells Fargo conditioned on the trustee’s execution of a release.
- Court approved the compromise but required the trustee to hold the payment pending a determination whether the payment is property of the bankruptcy estate; parties submitted a joint motion asking the court to decide that issue.
Issues
| Issue | Debtors' Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether the post‑petition remedial payment is property of the bankruptcy estate | Payment arose solely from the 2011 Consent Order and therefore is postpetition benefit not estate property | Payment compensates a prepetition claim (arising from the 2007 loan); trustee had to release estate claims to receive it, so it is estate property | The payment is property of the estate — proceeds/after‑acquired property traceable to prepetition causes of action |
Key Cases Cited
- United States v. Whiting Pools, 462 U.S. 198 (Sup. Ct. 1983) (broad scope of bankruptcy estate)
- In re Schmitz, 270 F.3d 1254 (9th Cir. 2001) (postpetition regulatory schemes creating new rights may not be estate property)
- In re Vote, 276 F.3d 1024 (8th Cir. 2002) (postpetition statutory benefits not property when prepetition loss lacks attendant value)
- TMT Procurement Corp. v. Vantage Drilling Co. (In re TMT Procurement Corp.), 764 F.3d 512 (5th Cir. 2014) (§541(a)(7) covers property acquired with or by estate property)
- In re Cusano, 264 F.3d 936 (9th Cir. 2001) (distinguishing accrual for ownership vs. statute of limitations)
- In re Brown, 363 B.R. 591 (Bankr. D. Mont. 2007) (later recovery on prepetition claim is estate property)
- In re Hyman, 123 B.R. 342 (9th Cir. BAP 1991) (broad definition of proceeds under §541(a)(6))
- In re Neidorf, 534 B.R. 369 (9th Cir. BAP 2015) (distinguishing when post‑settlement payments are not estate property)