In Re Carter
- Reporters:
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- Before:
- Kennedy
MEMORANDUM AND ORDER RE CHAPTER 7 TRUSTEE’S “MOTION TO DETERMINE WHETHER LIFE INSURANCE PROCEEDS CONSTITUTE AN ASSET OF THE CHAPTER 7 ESTATE” COMBINED WITH NOTICE OF THE ENTRY THEREOF
This core proceeding
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сame before the court on a motion filed by the Chapter 7 Trustee, Norman P. Hagemeyer, Esquire (“Trustee”), seeking a judicial determination regarding whether certain post-petition life insurance proсeeds constitute property of the section 541(a) estate of the above-named debtor, Mary E. Carter (“Mrs. Carter”).
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Mrs. Carter filed a response in opposition to the Trustee’s motion asserting that the lifе insurance proceeds are not property of the estate by virtue of
Based on the statements of counsel and consideration of the case record as a whole, the following shall сonstitute the court’s findings of fact and conclusions of law in accordance with
The ultimate question presented for judicial determination is whether the life insurance proceeds that Mrs. Carter becаme entitled to as a result of the death of her husband, the above-named debtor, David
The relevant background facts are undisputed and may be briefly summarized as follоws: On August 3, 1999, Mr. and Mrs. Carter filed a joint chapter 13 petition under the Bankruptcy Code (“Code”). On November 22, 2000, the chapter 13 case was voluntarily converted by Mr. and Mrs. Carter to a case under chapter 7 pursuant to
(a) The commencement of a case under section 301, 302, or 303 of this titlе creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:
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(5) Any interest in property that would have been property of the еstate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date—
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(C) as a beneficiary of a life insurance policy or of a death benefit plan.
Accordingly, any interest in property held by a debtor as of the date of the filing of the “petition” or acquired within 180 days after the filing of the “рetition” involving, for example, an inheritance or life insurance proceeds constitutes property of the bankruptcy estate. An interest in property acquired by a debtor and received as the designated beneficiary of a life insurance policy or death benefit plan is expressly included in
Similarly, in
Koch v. Myrvold
the court addressed the issue of whether an inheritance acquired within 180 days after the filing of the voluntary petition constituted property of the debtor’s chapter 7 estate following a conversion from chapter 13 to chapter 7.
In re Koch,
In the instant case, like in
Koch,
Mr. and Mrs. Carter filed only one voluntary petition. The word “petition,” as defined in section 101(42) of the Code,
As noted in this case, Mr. and Mrs. Cаrter filed a joint chapter 13 petition on August 3, 1999. More than a year later on November 22, 2000, they filed a notice of conversion pursuant to
Despite the informative and plain language of
Section 348(a), (f)(1)(A), and (f)(2) of the Code provides as follows:
(a) Conversion of a case from a case under one chapter of this title to a case under another chapter of this title constitutes an order for relief under the chapter to which the case is converted, but, except as provided in subsections
(b) and (c) of this section, does not effect a change in the date of the filing of the рetition, the commencement of the case, or the order for relief.
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(f)(1) Except as provided in paragraph (2), when a case under chapter 13 of this title is converted to a case under аnother chapter under this title—
(A) property of the estate in the converted case shall consist of property of the estate, as of the date of filing of the petition, that remains in the possession of or is under the control of the debtor on the date of conversion; and
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(2) If the debtor converts a case under chapter 13 of this title to a case under another chapter under this title in bad faith, the property in the converted case shall consist of the property of the estate as of the date of conversion.
The Bankruptcy Reform Act of 1994 clarified the prior split of casе law regarding what property exactly constitutes the property of the estate when a debtor converts from chapter 13 to chapter 7.
See
140 Cong. Rec. H10764 (daily ed. October 4, 1994)(providing a section-by-sеction description of H.R. 5116); Pub.L. No. 103-394 (enacted on October 22, 1994, effective in cases commenced on or after the date of the enactment). Prior to the 1994 amendments, courts interpreted the issue of what constitutes property of the estate differ
The relevant legislative history underlying the 1994 amendments manifests the clear intention of the Congress to clarify the split of authority previously existing under
In the еvent a conversion from chapter 13 to chapter 7 is made in bad faith, the Congress passed
No such bad faith exists in this case. Mr. and Mrs. Carter converted their joint chapter 13 case to a case under chapter 7 prior to the death of Mr. Carter. The Carters had theretofore attempted to satisfy a portion of their debts under a viable chapter 13 plan that was confirmed on September 21, 1999. They attempted to рay unsecured creditors 70% of their claims under the chapter 13 plan. However, they could not complete the repayment plan and converted the case from chapter 13 to chapter 7.
Based on the foregoing and after notice and opportunity for a hearing, the court holds that the life insurance proceeds here do not constitute property of Mrs. Carter’s bankruptcy estate due to the provisions of
Notes
. 28U.S.C. § 157(b)(2)(A).
. In essence, the Trustee seeks a judicial determination pursuant to
An adversary proceeding is governed by the rules of Part VII. The following arе adversary proceedings:
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(2) a proceeding to determine ... interest in property, other than a proceeding under Rule 4003(d);
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(9) a proceeding to obtain a declaratory judgment relating to any of the foregoing.
. See also