528 B.R. 803
Bankr. D. Colo.2015Background
- Debtor filed Chapter 13 and claimed a $9,361 homestead exemption; plan was confirmed March 18, 2014 and provided that estate property revested in Debtor upon confirmation.
- Post-confirmation the Debtor and Defendant (his wife) sold the homestead; net sale proceeds were $33,169.42 and Debtor’s share was $16,584.71.
- Debtor transferred his share of proceeds to Defendant (characterized by Defendant as prepaid child support); no court authorization was obtained for sale or transfer.
- Debtor converted the case to Chapter 7; Trustee filed an adversary under 11 U.S.C. § 549(a) to avoid the post-petition/pre-conversion transfer and later (in litigation) objected to the claimed exemption in the proceeds.
- Defendant moved to dismiss (treated as summary judgment because of extrinsic materials); Trustee moved for summary judgment. The court granted dismissal and denied Trustee’s summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are post-confirmation sale proceeds property of the bankruptcy estate (§ 549)? | Proceeds are estate property and Trustee can avoid the post-petition transfer. | Property revested in Debtor at confirmation under §1327(b); proceeds were not estate property. | Proceeds were not estate property; §549 claim fails. |
| Does confirmation revesting (§1327(b)) prevent conversion from bringing proceeds into Chapter 7 estate (§ 348)? | §348 pulls estate property into Chapter 7; Trustee can administer proceeds after conversion. | §1327(b) revested the property in Debtor and on conversion §348(f)(1)(A) only brings into Chapter 7 property still in Debtor’s possession/control at conversion — Defendant had possession. | Revesting removed the homestead/proceeds from the estate; because Defendant had possession at conversion §348(f) does not bring proceeds into Chapter 7. |
| Was Trustee’s objection to the claimed exemption timely after conversion? | Trustee argued the exemption could be challenged after conversion. | Trustee’s objection was filed more than 30 days after the §341 meeting in the converted case and thus untimely under Rule 1019/4003. | Objection was untimely and therefore overruled. |
| Did Debtor forfeit the exemption by transferring proceeds (i.e., failing to keep proceeds separate/identifiable)? | Transfer removed the statutory protection for sale proceeds, so proceeds should be estate property or nonexempt. | The homestead was exempt as of the petition date and revested at confirmation; transfer did not render proceeds estate property after confirmation. | Even if transfer occurred, the objection was untimely and moot; in any event the homestead/proceeds were not estate property at sale. |
Key Cases Cited
- Jones v. Cal. Franchise Tax Bd., 657 F.3d 921 (9th Cir. 2011) (interpreting “vest” under §1327(b) as absolute transfer of ownership)
- U.S. v. Richman (In re Talbot), 124 F.3d 1201 (10th Cir. 1997) (property revests in debtor upon confirmation; not estate property post-confirmation)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (movant's burden on summary judgment principles)
- Zibman v. Tow (In re Zibman), 268 F.3d 298 (5th Cir. 2001) (state exemption safe-harbor can lapse post-petition, converting proceeds to estate property)
- Brown v. [Trustee] (In re Brown), 375 B.R. 362 (Bankr. W.D. Mich. 2007) (post-confirmation revesting can render a later trustee objection moot)