527 B.R. 780
Bankr. N.D. Ga.2015Background
- Debtor Freeman filed Chapter 11 on Aug 3, 2009, confirmed a Chapter 11 plan on Mar 1, 2011, and converted voluntarily to Chapter 7 on Apr 29, 2013.
- Pre-petition severance entitlement (~$29,826; received post-petition checks totaling $21,635) was deposited into a State Farm retirement account in Sept–Oct 2009.
- A 2010 bonus ($13,395.29) was earned and deposited into the retirement account pre-confirmation (Apr 5, 2010).
- A 2011 bonus ($10,000) was earned and deposited post-confirmation (Apr 11, 2011) into the same retirement account.
- Creditor Rogers objected to the Debtor’s claimed exemption in these funds, arguing post-petition receipts that became estate property during Chapter 11 remained estate property after conversion to Chapter 7; Debtor argued the estate “reset” and only property as of petition date matters for the converted Chapter 7 estate.
Issues
| Issue | Rogers' Argument | Freeman's Argument | Held |
|---|---|---|---|
| Whether severance pay received post-petition is property of the Chapter 7 estate after conversion | Severance received while DIP became estate property and should remain estate property on conversion | Property that vested in Debtor at plan confirmation revests in Debtor and not in converted Chapter 7 estate | Severance income vested in Debtor at confirmation and did not revest in Chapter 7 estate (not estate property) |
| Whether 2010 bonus (earned post-petition but pre-confirmation) remained estate property after conversion | 2010 bonus became estate property when earned and should remain estate property on conversion | Same revesting argument: property of the estate at confirmation vested in Debtor | 2010 bonus vested in Debtor at confirmation and did not revest in Chapter 7 estate |
| Whether 2011 bonus (earned post-confirmation, pre-conversion) became property of the Chapter 7 estate on conversion | 2011 bonus, earned while Chapter 11, was estate property and remains so on conversion to Chapter 7 | Post-petition earnings should be excluded from Chapter 7 estate because §541(a)(6) excludes earnings after commencement for Chapter 7 debtors; conversion does not change petition date | 2011 bonus was property of the Chapter 7 estate upon conversion (subject to partial exemption) |
| Whether claimed exemption in 2011 bonus (State Farm retirement exemption under O.C.G.A.) is valid | Debtor claimed retirement-account exemption for the funds invested | Rogers objected; argued funds retained their character as earnings/cash when contributed and are not covered | Debtor’s exemption under O.C.G.A. §44-13-100(a)(2)(F) denied as defective; Debtor may amend schedules and claim up to $1,040 under wildcard exemption, leaving $8,960 nonexempt |
Key Cases Cited
- Bell v. Edgecomb, 225 F.3d 203 (2d Cir.) (confirmation vests estate property in debtor; conversion does not recapture vested property)
- Telfair v. First Union Mortg. Corp., 216 F.3d 1333 (11th Cir.) (estate-transformation approach reconciling post-petition earnings and plan vesting)
- Waldron v. Hall, 536 F.3d 1239 (11th Cir.) (post-confirmation acquisitions do not vest in debtor; §1306/§1115 refills estate after confirmation)
- Pioneer Liquidating Corp. v. U.S. Trustee, 264 F.3d 803 (9th Cir.) (plan provisions can be construed to revest assets upon conversion)
- Lybrook v. Robb, 951 F.2d 136 (7th Cir.) (line of cases treating converted estates as passing unaltered)
- Bobroff v. United States, 766 F.2d 797 (3d Cir.) (original-petition-date rule for what constitutes estate property on conversion)
- Bracewell v. U.S. Trustee, 454 F.3d 1234 (11th Cir.) (discussing Chapter 12/§1207 interplay and temporal scope of estate property on conversion)