625 B.R. 194
Bankr. D. Idaho2021Background
- Debtor Michelle Cofer filed Chapter 13 on April 17, 2019, scheduling a home in Paul, Idaho valued at $100,250 and claiming a $100,000 homestead exemption.
- The property was encumbered by a Ditech mortgage (~$61,074) and a judgment lien (avoided under §522(f)); the court later limited Debtor’s exemption to $32,020.56 (order entered Sept. 24, 2019).
- Debtor’s Chapter 13 plan provided that estate property would vest in the debtor upon confirmation; the plan was confirmed Sept. 25, 2019.
- Debtor converted the case to Chapter 7 (conversion granted Mar. 27, 2020). The Chapter 7 trustee moved to confirm the exemption amount and to treat postpetition appreciation as estate property.
- Trustee argued the exemption remains $32,020.56 and appreciation inured to the Chapter 7 estate; Debtor argued the vested home was not estate property on conversion and, alternatively, any appreciation belongs to the Debtor.
Issues
| Issue | Plaintiff's Argument (Trustee) | Defendant's Argument (Cofer) | Held |
|---|---|---|---|
| Whether §1327(b) vesting prevents §348(f)(1)(A) from making prepetition estate property part of the converted Chapter 7 estate | §348(f)(1)(A) governs conversion; property of the estate as of petition date that debtor still possesses becomes Chapter 7 estate property | §1327(b) revested ownership on confirmation and therefore the property ceased to be estate property and cannot revest on conversion | Held: §348(f)(1)(A) controls; property that was estate property on petition date and remained in debtor’s possession became Chapter 7 estate property despite §1327 vesting |
| Which homestead exemption amount applies in the converted case | Exemption previously determined in Chapter 13 ($32,020.56) should remain (snapshot rule as of petition date) | Exemption should be determined as of conversion (Debtor seeks original $100,000 claimed) | Held: Snapshot rule controls; exemption remains $32,020.56 as determined based on petition date |
| Whether postpetition, pre-conversion appreciation inured to the Chapter 7 estate | Postpetition appreciation (market increase or lien paydown) is property of the estate on conversion and may be administered by trustee | Postpetition appreciation inured to the Debtor (analogous to postpetition acquisitions/earnings) and does not become estate property on conversion absent bad faith | Held: Postpetition appreciation inured to the Debtor; trustee not entitled to appreciation absent a showing of bad-faith conversion |
Key Cases Cited
- Sender v. Golden (In re Golden), 528 B.R. 803 (Bankr. D. Colo. 2015) (interpreted §348 and §1327; rejected reading of §1327 that would nullify §348 on conversion)
- In re Barrera, 620 B.R. 645 (Bankr. D. Colo. 2020) (held postpetition appreciation inured to debtor on conversion; relied on §348 legislative history)
- In re Goins, 539 B.R. 510 (Bankr. E.D. Va. 2015) (concluded postpetition appreciation becomes estate property on conversion)
- Cal. Franchise Tax Bd. v. Kendall (In re Jones), 657 F.3d 921 (9th Cir. 2011) (discussed effect of revesting under §1327 on the automatic stay)
- In re Lynch, 363 B.R. 101 (9th Cir. BAP 2007) (rejected implicit valuation on confirmation; recognized exclusion of equity created postpetition from converted estate in appropriate circumstances)
- Hyman v. Internal Revenue Serv., 967 F.2d 1316 (9th Cir. 1992) (cited re: §541(a)(6) principles on postpetition proceeds)
- In re Reed, 940 F.2d 1317 (9th Cir. 1991) (cited for general principles on postpetition value changes)