Background - Two Chapter 7 debtors (Bird; Brent & Jo‑Ann Christensen) claimed Utah homestead exemptions for fully or over‑encumbered residences; Gary Jubber was appointed Chapter 7 trustee and employed counsel (Fabian VanCott). - Trustee objected to the exemptions, negotiated § 506(c)/carve‑out stipulations with the IRS that would reserve $10,000 from each sale for unsecured creditors, and moved to sell the homes free and clear. - Bankruptcy court overruled the trustee’s objection to the exemptions, debtors received Chapter 7 discharges, then moved to convert to Chapter 13 and amended schedules removing the exemptions; conversion was granted. - After conversion, trustee and counsel sought allowance of fees and expenses as § 503 administrative claims (to be paid in Chapter 13 plans): about $34,745 (Bird) and $31,764 (Christensens). - Bankruptcy court denied the fee applications under § 330(a)(4)(A)(ii) as services that were neither necessary to administration nor reasonably likely to benefit the estate; the court found the trustee improperly sought to manufacture equity via carve‑outs that would primarily benefit professionals. - On appeal, the Bankruptcy Appellate Panel affirmed, emphasizing trustee duties to abandon valueless/burdensome assets, statutory limits on selling exempt homesteads free and clear, and protection of exemption policy. ### Issues | Issue | Trustee/Counsel Argument | Debtors' Argument | Held | |---|---:|---|---| | 1. Were the services "necessary to administration" under § 330(a)(4)? | Services were ordinary estate administration (object to exemptions; pursue sales) and thus compensable. | Trustee should have abandoned fully‑encumbered homesteads; pursuit of sale was unnecessary. | Denied—services not necessary; trustee should have abandoned assets that yielded no meaningful benefit to unsecured creditors. | | 2. Were services "reasonably likely to benefit the estate" under § 330(a)(4)? | Carve‑outs negotiated with IRS would create distributable funds (albeit small) and thus benefit unsecured creditors. | The proposed sales would mainly enrich professionals; proceeds insufficient to cover liens, exemptions, admin costs; not reasonably likely to benefit estate. | Denied—services not reasonably likely to benefit estate; sale would primarily benefit trustee/counsel and erode debtor exemptions. | | 3. Could trustee sell homesteads free and clear under § 363(f)? | § 363(f) options satisfied (consent via stipulation, carve‑out, or § 363(f)(5) money satisfaction); sale permissible. | No bona fide dispute under § 363(f)(4) existed after exemptions allowed and conversion; Utah homestead law bars forced sale except narrow categories, so § 363(f)(5) inapplicable. | Denied—§ 363(f) conditions not met given Utah law and procedural posture; sale free and clear not authorized. | | 4. Do §§ 724/522 or § 506(c) permit subordinating/exhausting homestead exemptions to pay administrative expenses? | § 724(b) and tax lien treatment allow paying administrative expenses from tax lien proceeds; § 506(c) carve‑outs justify surcharge. | §§ 724/522 do not authorize evading § 363(f) or Utah homestead protections; Siegel and related authority prevent surcharging exemptions except where Code expressly permits. | Denied—statutes do not give trustee authority to override exemption protections or use carve‑outs to effectively surcharge homesteads; such schemes undermine fresh‑start policy. | ### Key Cases Cited Schwab v. Reilly, 560 U.S. 770 (2010) (procedural rules on objections to claimed exemptions; interpretation limited relevance to homestead facts here) Law v. Siegel, 134 S. Ct. 1188 (2014) (limits on surcharging exempt property; exemptions cannot be denied except on Code‑specified bases) In re Traverse, 753 F.3d 19 (1st Cir. 2014) (discusses equity required to justify sale of encumbered property for unsecured creditors) In re Scrivner, 535 F.3d 1258 (10th Cir. 2008) (exempt property may not be surcharged to pay administrative expenses) * Harris v. Viegelahn, 135 S. Ct. 1829 (2015) (cited for liquidation/distribution priorities under the Code)