Porrett v. Hillen (In re Porret), 564 B.R. 57

Debtors Gary and Jennifer Porrett obtained a Wells Fargo mortgage in 2007 and filed Chapter 7 in December 2009; the case was closed in 2011 and later reopened in 2015.
A Federal Reserve Board Consent Order (July 20, 2011) resolving regulatory claims against Wells Fargo provided remedial payments to a class of borrowers that included the Porretts.
Wells Fargo paid $8,120.63 to the bankruptcy estate after the trustee negotiated and obtained court approval of a compromise; receipt required execution of a release waiving claims against Wells Fargo.
Trustee moved for a determination that the payment is estate property; the bankruptcy court held it is estate property and the debtors appealed.
Central legal question: whether a post-petition payment under a regulatory Consent Order is property of the bankruptcy estate under 11 U.S.C. § 541(a)(1), (6), or (7).

Issue	Debtors' Argument	Trustee's Argument	Held
Whether debtors had a prepetition cause of action that became estate property under § 541(a)(1)	The Consent Order (post-petition) created the right to payment; no prepetition claim was established, so funds belong to debtors	The alleged wrongful lending practices occurred at loan origination (2007); any claims accrued prepetition and therefore vested in the estate	Court: claim accrued prepetition (injury occurred when higher interest was paid); claim was estate property under § 541(a)(1)
Whether the post-petition payment is estate property as § 541(a)(6) "proceeds" or § 541(a)(7) after-acquired property	Payment arises from the Consent Order itself and thus is not traceable to a prepetition estate asset	Payment is traceable to the prepetition cause of action; receipt required a release (tie to prepetition claim), so payment is proceeds and/or after-acquired property of the estate	Court: payment is traceable to the prepetition claim and, because release was required, is estate property under § 541(a)(6) and/or § 541(a)(7)

Cusano v. Klein, 264 F.3d 936 (9th Cir. 2001) (a cause of action accrues under state law; an accrued prepetition claim becomes estate property)
Segal v. Rochelle, 382 U.S. 375 (U.S. 1966) (postpetition receipts must be "rooted in the prepetition past" to be estate property)
In re Neidorf, 534 B.R. 369 (9th Cir. BAP 2015) (postpetition consent-order payment was not estate property where rights arose only postpetition)
In re Vanwart, 497 B.R. 207 (Bankr. E.D.N.C. 2013) (postpetition blanket payments not tied to a prepetition claim are not estate property)
In re Magnacom Wireless, L.L.C., 503 F.3d 984 (9th Cir. 2007) (§ 541(a)(6) "proceeds" include funds traceable to original estate property)