Thе issues in this appeal are whether a debtor’s claims for legal relief that arose after the confirmation but before the completion of his plan to pay creditors are property of the estate, under Chapter 13 of the Bankruptcy Code,
see
11 U.S.C. § 1306(a), and whether the bankruptcy court abused its discretion by requiring the debtor to amend his schedule of assets to disclose proceeds of any sеttlement of those claims,
see
Fed. R. Bankr.P. 1009. Michael and Barbara Waldron appeal the judgment that Mr. Waldron’s claims for underinsured-motorist benefits are property of the Waldrons’ bankruptcy estate and the Waldrons must disclose any settlement of those claims by an amendment of their schedule of assets. Because the plain text of section 1306(a) establishes that Mr.
I.BACKGROUND
The Waldrons filed a petition for relief under Chapter 13, and O. Byron Meredith became the trustee of the bankruptcy estate. On November 16, 2004, the bankruptcy court confirmed the Waldrons’ plan to pay their creditors. That plan required the Wаldrons to pay the trustee $516 a month.
Mr. Waldron suffered personal injuries in an automobile collision on May 10, 2005, before the Waldrons had completed their payments under the plan. The bankruptcy court approved both the settlement of Mr. Waldron’s claim against the other driver for $25,000 and the disbursement of that amount to the Waldrons as part of their exempt property. Mr. Waldron also pursued claims for underinsured-motorist benefits against Georgia Farm Bureau and Selective Insurance Company. The Wal-drons moved the bankruptcy court for the authority to settle those claims without further approval by the court. The Wal-drons argued that any proceeds of a settlement would not be property of the estate.
The bankruptcy court ruled that Mr. Waldron’s remaining claims were property of the estate and any settlement must be disclosed by an amendment of the debtors’ schedule of assets and administered in the bankruptcy proceeding. The district court affirmed.
II.STANDARDS OF REVIEW
We review
de novo
the conclusions of law of both the bankruptcy court and the district court.
Equitable Life Assurance Soc’y v. Sublett (In re Sublett),
III.DISCUSSION
Wе divide our discussion into two sections. First, we address whether Mr. Wal-dron’s claims for underinsured-motorist benefits are property of the estate. Second, we address whether the bankruptcy court abused its discretion when it required the Waldrons to amend their schedules of assets to disclose any settlement of Mr. Waldron’s claims.
A. Mr. Waldron’s Claims Are Property of the Estate.
Sections 1306(a) and 1327(b) of the Code define property of the estate in a proceeding undеr Chapter 13. Section 1306(a), on the one hand, expansively defines property of the estate to include all property acquired by the debtor after a case commences and until it ends or is converted:
Property of the estate includes, in addition to the property specified in section 541 of this title—
(1) all property of the kind specified in such section that the debtor acquires after thе commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first; and
(2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first.
The question presented is whether Mr. Waldron’s claims for underinsured-motorist benefits, which arose after confirmation оf the Waldrons’ plan to pay their creditors, are property of the estate under section 1306(a) or whether those claims are vested in Mr. Waldron under section 1327(b). The Waldrons argue that, upon confirmation, “all of the property of the bankruptcy estate ‘revested’ in the Wal-drons by operation of Section 1327(b)” and Mr. Waldron’s claims, which are not part of the Waldrons’ plan, did not become prоperty of the estate. The trustee responds that Mr. Waldron’s claims are property of the estate under section 1306(a).
We conclude, based on the plain language of section 1306(a), that Mr. Wal-dron’s claims are property of the estate. Mr. Waldron acquired his claims for un-derinsured-motorist benefits after the commencement of the Waldrons’ bankruptcy case but before their case was dismissеd, closed, or converted. Section 1306(a) does not mention the confirmation of the debtor’s plan as an event relevant to what assets are property of the estate,
see Sec. Bank v. Neiman,
Our analysis is not, as the Waldrons argue, governed by the estate transformation approach that we adopted in
Telfair v. First Union Mortgage Corp.,
We ... “read the two sections, 1306(a)(2) and 1327(b), to mean simply that while the filing of the petition for bankruptcy places all the property of the debtor in the control of the bankruptcy court, the plan upon confirmation returns so much of that property to the debtor’s control as is not necessary to the fulfillment of the plan.”
Id.
at 1340 (quoting
Black v. U.S. Postal Serv. (In re Heath),
We did not address in
Telfair
entirely new property interests acquired by the debtor after confirmation and unencumbered by any preexisting obligation. We instead stated that “confirmation returns so much of that property to the debtоr[ ],” and “that property” referred to the property of the debtor placed in the control of the bankruptcy court when the debtor filed
We are not alone in our reading of sections 1306(a) and 1327(b). The First Circuit also has concluded that assets acquired after confirmation are property of the estate.
Barbosa v. Soloman,
As one court has explained, some property of the estate is vested in the debtor at confirmation, under section 1327(b), but property acquired later vests in the estate, under section 1306(a), until the case ends or is converted:
While the case is pending, the post-petition property ... [is] added to the estate until confirmation, the event that triggers [section] 1327(b) and “vests” the property of the estate in the debtor. That is, the property interests comprising the pre-confirmation estate property are transferred to the debtor at confirmation, and this “vesting” is free and clear of the claims or interests of creditors provided for by the plan, [section] 1327(b), (c). Finally, the property of the estate once again accumulates property by operation of [section] 1306(a) until the case is “closed, dismissed, or converted.”
City of Chicago v. Fisher (In re Fisher),
B. The Bankruptcy Court Did Not Abuse Its Discretion When It Required the Waldrons To Amend Their Schedules of Assets To Disclose Any Settlement of Mr. Waldron’s Claims.
Our conclusion that Mr. Waldron’s claims for underinsured-motorist benefits are property of the estate answers one of the two questions in this appeal; we must
We recognized a debtor’s duty to disclose changes in his finаncial situation in
Bumes v. Perneo Aeroplex, Inc.,
A debtor seeking shelter under the bankruptcy laws must disclose all assets, or potential assets, to the bankruptcy court. The duty to disclose is a continuing one that does not end once the forms are submitted to the bankruptcy court; rather, a debtor must amend his financial statements if circumstances change.
Id. at 1286 (citations omitted).
We later explained that a Chapter 13 debtor had a duty to disclose a claim for legal relief regardless of whether he later converted his case under Chapter 7. In
De Leon v. Comcar Industries, Inc.,
Juan De Leon failed to disclose a complaint of employment discrimination that arose before he petitioned for bankruptcy under Chapter 13.
More recently, we concluded that a debtor had a duty to amend his schedule of assets to disclose a complaint that he filed after his plan to pay his creditors had been confirmed.
Ajaka v. BrooksAmerica Mortgage Corp.,
In the light of our precedents, the bankruptcy court did not abuse its discretion when it required the Waldrons to amend their schedule of assets to disclose any settlement Mr. Waldron may acquire after confirmation. Mr. Waldron must disclose the proceeds of any settlement of his claims for underinsured-motorist benefits. We agree with the district court and bankruptcy court that an amеndment under Rule 1009 is a proper vehicle for that disclosure. Fed. R. Bankr.P. 1009.
The Waldrons argue that a postconfir-mation duty of disclosure for Chapter 13 debtors conflicts with the Federal Rules of Bankruptcy Procedure, but we disagree. Section 521 of the Code, implemented through Rule 1007, requires the debtor to file a schedule of all assets and liabilities at the commencement of the case, 11 U.S.C. § 521; Fed. R. Bankr.P. 1007(b), and Rule 1009 pеrmits a debtor to amend his schedule and a court to order an amendment upon the motion of a party in interest, Fed. R. Bankr.P. 1009. These rules complement the continuing duty to disclose recognized by our precedents.
The disclosure of postconfirmation assets gives the trustee and creditors a meaningful right to request, under section 1329, a modification of the debtor’s plan to pay his creditors. A confirmed plаn may be modified at the request of the debtor, the trustee, or the holder of an allowed unsecured claim to “(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan; [or to] (2) extend or reduce the time for such payments.” 11 U.S.C. § 1329(a). Payments under a plan are based on the debtor’s disposable income when the plan is confirmed. Id. § 1325(b)(1)(B). When a debtor discloses assets acquired after confirmation, creditors may move the bankruptcy court to modify the plan to increase payments made by the debtor to satisfy a larger percentage of the creditors’ claims. Id. § 1329(a)(1). If postcon-firmation assets were not subject to disclosure, modifications for increased payments would be rare because few debtors would voluntarily disclose new аssets, and the trustee and creditors would be unlikely to obtain this information from sources other than the debtor.
The Waldrons argue that a duty to disclose assets acquired after confirmation unduly burdens Chapter 13 debtors, but we disagree. The bankruptcy court is entitled to learn about a substantial asset that the court had not considered when it confirmed the debtors’ plan. The Wal-drons speculate that debtors will have to amend their schedule of assets to disclose their wages, “weekly groceries, or every tank of gasoline” as new assets, but these assets are the kind that are taken into
We do not hold that a debtor has a free-standing duty to disclose the acquisition of any property interest after the confirmation of his plan under Chapter 13. Neither the Bankruptcy Code nor the Bankruptcy Rules mention such a duty, cf. Fed. R. Bankr.P. 1007(h) (requiring a debtor to supplement his schedule regarding interests acquired after petition under section 541(a)(5) of the Code), and our prеcedents in Bumes, De Leon, and Ajaka do not address that issue. But the bankruptcy court has the discretion, under Rule 1009, to require a debtor to amend his schedule of assets to disclose a new property interest acquired after the confirmation of the debtor’s plan.
The Waldrons also argue that, if the court orders a modification of the plan based on postconfirmation assets, the debtor will not have any assets to satisfy the сlaims of creditors who relied on postconfirmation assets to extend credit to the debtor, but our conclusion balances the competing interests of a debtor’s pre-petition and postpetition creditors. “[T]o allow post-confirmation creditors to undermine the ability of pre-confirmation creditors to be paid would place creditors who were or should have been awarе of debtors’ financial difficulties in a better position than those who may have extended credit before debtors’ precarious financial position[s] arose.”
Kolenda,
As we recognized in
Bumes,
“[f]ull and honest disclosure in a bankruptcy case is ‘crucial to the effective functioning of the federal bankruptcy system,’ ”
IV. CONCLUSION
The judgment in favor of the trustee is
AFFIRMED.