631 B.R. 914
Bankr. W.D. Wash.2021Background
- Debtors filed Chapter 13 on June 13, 2019; plan confirmed; case converted to Chapter 7 on February 5, 2021.
- Debtors scheduled real property in Bellingham, WA with petition-date value $500,000, secured debt ~$375,077, and a claimed homestead exemption of $124,923.
- Chapter 7 Trustee asserts current market value is at least $700,000 and moved under § 348(f)(1) for a ruling that the Chapter 7 estate includes post‑petition, pre‑conversion appreciation and to market the residence.
- Debtors contend appreciation between the Chapter 13 petition date and conversion belongs to the debtors (not the Chapter 7 estate).
- Court found parties waived requirement of an adversary proceeding and heard the contested matter on the merits.
- Court held that the full present value of the real property, including post‑petition appreciation, is property of the Chapter 7 estate and granted the Trustee’s motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether post‑petition, pre‑conversion appreciation in property value inures to the Chapter 7 estate or to the debtor | Appreciation inures to the Chapter 7 estate; § 348(f)(1) does not treat appreciation as a separate after‑acquired asset | Appreciation inures to the debtor; legislative history of § 348(f) shows Congress intended to protect equity gained during Chapter 13 (Cofer approach) | Full present value, including appreciation, is property of the Chapter 7 estate (Goins approach adopted) |
| Whether a determination that an asset is estate property required an adversary proceeding under Rule 7001 | Motion treated as contested matter; parties waived right to adversary proceeding | Same — parties agreed contested matter appropriate | Court adjudicated the issue in the contested matter (adversary not required due to waiver) |
Key Cases Cited
- United States v. Ron Pair Enter., 489 U.S. 235 (1989) (statutory interpretation: plain meaning controls; consult legislative history only if ambiguous)
- Schwaber v. Reed (In re Reed), 940 F.2d 1317 (9th Cir. 1991) (post‑petition appreciation inures to the bankruptcy estate)
- Wilson v. Rigby, 909 F.3d 306 (9th Cir. 2018) (proceeds, rents, profits and appreciation inure to the estate under § 541(a)(6))
- In re Smith, 235 F.3d 472 (9th Cir. 2000) (post‑petition acquisitions belong to the debtor in an individual Chapter 7 case)
- In re Bobroff, 766 F.2d 797 (3d Cir. 1985) (post‑petition acquisitions during Chapter 13 can inure to debtor on conversion)
- In re Lybrook, 951 F.2d 136 (7th Cir. 1991) (held post‑petition acquisitions could become Chapter 7 estate property)
- In re Goins, 539 B.R. 510 (Bankr. E.D. Va. 2015) (post‑petition appreciation inures to Chapter 7 estate)
- In re Peter, 309 B.R. 792 (D. Or. 2004) (increase in equity from paydown and appreciation inures to Chapter 7 estate)
- In re Cofer, 625 B.R. 194 (Bankr. D. Idaho 2021) (statute ambiguous; relied on legislative history to give appreciation to debtor)
- In re Barrera, 620 B.R. 645 (Bankr. D. Colo. 2020) (followed Cofer; legislative history favors debtor retention of appreciation)