In this bankruptcy case, we determine whether a creditor that is required to return to the trustee a payment from the debtor made within the ninety-day preference period still maintains a claim against the debtor for a nondischargeable claim. Busseto Foods, Inc. (“Busseto”) contends that the payment it was required to pay to the trustee was a repayment of funds embezzled by the debtor, Charles Laizure, and thus a nondischargeable claim. The Bankruptcy Appellate Panel (“BAP”), in affirming the bankruptcy court, held that 11 U.S.C. § 502(h) only allows Busseto to bring a claim against the bankruptcy estate and not against the debtor, Laizure.
We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1) and we reverse the decision of the BAP and remand for further proceedings.
I.
Busseto employed Charles Laizure as its controller and chief financial officer from February 1, 1998 until August 20, 2004. After Laizure left, Busseto discovered he had embezzled a large amount of money during his employment. After admitting he took the money, Laizure agreed to repay the funds in installments. He first paid Busseto $10,000 in December 2004 and then $30,000 on February 18, 2005. On June 5, 2005, Laizure arranged a final *695 payment of $38,833.70 to Busseto to be paid directly from escrow upon the closing of the sale of his house. Shortly thereafter escrow closed and Busseto received the final payment.
Less than ninety days after the $38,833.70 payment to Busseto, Laizure filed a Chapter 7 bankruptcy petition on August 17, 2005. After learning of Lai-zure’s June payment to Busseto, the Chapter 7 trustee pursuant to 11 U.S.C. § 547 sent Busseto a letter demanding the return of the $38,833.70 because Laizure had made the payment during the ninety-day preference period.
Busseto and the trustee then engaged in negotiations to settle the matter. Fearing the negotiations would not resolve the issue as the nondischargeability filing deadline approached, Busseto filed the complaint at issue here on November 17, 2005 to determine the amount and discharge-ability of Laizure’s debt. 1 The complaint alleged that, because of Laizure’s embezzlement and other conduct involved with the debt, any amount returned to the trustee pursuant to the demand should be held nondischargeable under 11 U.S.C. § 523(a)(4).
After filing the complaint, Busseto agreed with the trustee to pay the estate $34,000 to resolve the preference matter. Busseto then filed a claim against the bankruptcy estate for $34,000. During the bankruptcy proceedings, the trustee collected only a total of $34,628.83, $34,000 of which came from Busseto. After deducting compensation and expenses for the trustee in the amount of $4,253.38, the balance of $30,375.45 was used to pay Lai-zure’s priority tax claims.
While the estate was being settled, Lai-zure filed a motion in bankruptcy court to strike Busseto’s November 17 complaint or in the alternative, for a more definite statement. The bankruptcy court granted Laizure’s motion to dismiss Busseto’s complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. The bankruptcy court reasoned that “there was no debt on the day the bankruptcy was filed” because Busseto was fully repaid at that time. In addition, no debt existed on the date the complaint was filed because Busseto had not yet returned any money to the estate on that date. The bankruptcy court also found that § 502(h) does not “revive ... individual liability that can be imposed ... on the debtor.” Busseto then appealed this decision to the Bankruptcy Appellate Panel.
On appeal to the BAP, Busseto argued that § 502(h) reinstated its claim against Laizure after Busseto paid the settlement of the trustee’s claim. However, the BAP, in affirming the bankruptcy court, concluded that § 502(h) does not permit Busseto to “reinstate[ ] its claim against the debtor once it paid the settlement of the trustee’s claim.”
Busseto Foods, Inc. v. Laizure (In re
Laizure),
The BAP also briefly addressed the bankruptcy court’s ruling that no debt existed on the petition date and Busseto’s counter-argument that it did have a contingent claim under the Code’s broad definition of “claim.” Id. at 607-08. The BAP agreed with the bankruptcy court that no claim existed on the petition date and further stated that even if Busseto had a contingent claim on the petition date, § 727(b) would likely “eviscerate [Busse-to’s] position.” Id. at 608.
*696 II.
We review BAP decisions
de novo
and apply the same standard that the BAP uses to review bankruptcy court decisions
Arrow Elec., Inc. v. Justus (In re
Kaypro),
A claim arising from the recovery of property under section 522, 550, or 553 of this title shall be determined, and shall be allowed under subsection (a), (b), or (c) of this section, or disallowed under subsection (d) or (e) of this section, the same as if such claim had arisen before the date of the filing of the petition.
11 U.S.C. § 502(h). Simply stated, if the claim meets certain requirements the claimant can bring the claim as if it had arisen before filing the petition.
In this case, the trustee avoided Lai-zure’s final transfer to Busseto under § 547 and recovered the $34,000 under § 550. According to the language of § 502(h), the trustee, through using this § 550 recovery ability, revived Busseto’s claim to prepetition status. Consequently, Busseto has a claim against Laizure “the same as if ... [it] had arisen before the date of the filing of the petition.” 11 U.S.C. § 502(h).
The bankruptcy court dismissed Busse-to’s claim under Fed.R.Civ.P. 12(b)(6) because “there was no debt on the day the bankruptcy was filed” and Busseto had not yet returned any money to the estate on the date the complaint was filed. The bankruptcy court also found that § 502(h) does not “revive ... individual liability that can be imposed ... on the debtor.” Although it admitted feeling sympathetic toward Busseto, the bankruptcy court believed it had no statutory ability to remedy the situation and dismissed Busseto’s complaint.
In affirming the bankruptcy court, the BAP narrowly read § 502(h) as only allowing Busseto to pursue a claim against the bankruptcy estate and not the debtor.
In re Laizure,
The BAP’s conclusion, however, conflicts with our precedent as well as the relevant statutory language. In In re Verco we stated:
[T]he import of Section 502(h) is that where a claim is allowable as provided in that section, its status is as a claim in existence on the date of the filing of the petition regardless of when, after the petition, the trustee has taken the necessary action and recovered.
If the debt to Busseto is dischargeable, the bankruptcy proceeding would dis *697 charge the debt. However, if the debt is nondisehargeable, and there had been no preference avoidance by the trustee, the debt would have remained nondischargeable. Thus, the question we face is whether the trustee’s action in requiring Busseto to pay to the bankruptcy estate the amount it received from Laizure deprived Busseto of its non-dischargeable claim.
The BAP held that § 502(h) pertains only to claims against the bankruptcy estate, not to claims against the debtor.
In re Laizure,
This statutory language is notable for two reasons. First, the wording of the subsection requires a § 550 claim to be “determined.” There would be no reason to require a § 502(h) determination if it were subsumed by allowability, so the plain language of § 502 demonstrates that the determination is an independent inquiry. Second, the statute’s use of the word “and” shows Congress’ intent to reinstate both determined and allowed claims.
Section 523 further explains the import of the word “determination.” The phrase “determination of dischargeability” appears twice in § 523. See 11 U.S.C. § 523(a)(3)(B), (d). This phrase is significant because § 523 states that a “discharge under section 727 ... of this title does not discharge an individual debtor from any debt.” § 523(a) (emphasis added). “Any debt” is certainly broad enough to apply to personal claims, so if a claim is determined to be nondisehargeable, § 523 allows that claim to be brought against the individual debtor. Thus, if a § 550 claim is determined to be nondisehargeable under § 502(h), § 523 permits that reinstated claim to be brought against the debtor personally.
We have found only one case from other circuits that analyzes § 502(h) and note that it reaches a similar conclusion. The First Circuit analyzed the language of § 502(h) as it related to the secured or unsecured status of a claim.
Fleet Nat’l Bank v. Gray (In re Bankvest Capital Corp.),
We reach essentially the same conclusion here. By avoiding Laizure’s repayment to Busseto, the trustee put Busseto in a position where it was still not fully repaid the total amount of Laizure’s em *698 bezzled funds. Under § 502(h), Busseto therefore returned to the same position it was in before Laizure made the final repayment. Without recourse through § 502(h), Busseto would never recoup the embezzled funds. To read § 502(h) otherwise would negate the impact and role § 502(h) plays in the overall statutory scheme. Accordingly, we hold that Busse-to retains its nondischargeable claim against Laizure just as the First Circuit held that Fleet retained its status as a secured creditor.
County of Sacramento v. Hackney (In re Hackney)
supports our holding.
In reaching this conclusion in a carefully reasoned opinion, the court specifically addressed whether § 502(h) applied solely to claims against the estate and not the debt- or. After reading the relevant statutory language and case law, including
In re Verco,
the court concluded that “the claim arising from the avoidance of a transfer under 11 U.S.C. § 502(h) is a claim against the debtor, not just a claim against the estate.”
In re Hackney,
In addition to its main findings, the BAP determined that even if Busseto had a claim, § 727(b) would likely foreclose it by discharging any claim arising under § 502.
See In re Laizure,
A discharge under section 727 ... of this title does not discharge an individual debtor from any debt ... for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.
11 U.S.C. § 523(a)(4). Reading both statutes according to their clear and plain meaning, § 727 does not foreclose Busse-to’s argument. Instead, § 727 does not apply because it excepts claims brought under § 523, such as Busseto’s claim against Laizure for embezzlement.
Finally, this conclusion best advances the policies of our bankruptcy laws. As the Supreme Court has explained, “the Act limits the opportunity for a completely unencumbered new beginning to the honest but unfortunate debtor.”
Grogan v. Garner,
III.
For the reasons stated, the BAP erred in affirming the bankruptcy court’s dismissal of Busseto’s complaint. Because of the dismissal under 12(b)(6), the bankruptcy court did not reach the factual issue of whether Laizure’s debt is nondischargeable. We REVERSE the decision of the BAP, and we REMAND for further proceedings.
Notes
. The deadline for filing nondischargeability complaints was November 22, 2005.