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August 26, 2008

11th Circuit Court of Appeals Rules on Whether Property Acquired Post-Chapter 13 is Property of the Estate

In re Waldron,  --- F.3d ---, 2008 WL 2953571 (11th Cir,  August, 2008)

Issue:   Is an asset acquired after a chapter 13 plan is confirmed but before the plan is completed “property of the estate,” and can the bankruptcy court order the debtor to amend his schedules and disclose the asset?                   

Holding:    Yes.   

This chapter 13 debtor was involved in an auto accident after his plan was confirmed but before it was completed.  He received $25,000 which he claimed exempt and the bankruptcy court agreed.  He then pursued an “under-insured” claim under Georgia law.  He moved the bankruptcy court for an order that any proceeds are not property of the estate.  He argued that when the plan was confirmed, the property revested in him under 1327(b).  The court denied the request saying the definition of property of the estate under 1306(a) controls and ordered the debtor to amend his schedules.  The district court affirmed. 

The 11th Circuit also affirmed.  “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.”  1306(a) states that property acquired after the commencement of the case which would have been an asset under 541(a) is property of the estate.  “If Congress had intended for confirmation to so dramatically affect the expansive definition of property of the estate found in [section] 1306, it knew how to draft such a provision.”  As to the court ordered the amendment, the 11th Circuit said the order was appropriate under FRBP 1009 and “[t]he 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.”  The debtor said he would have to amend every time he bought groceries if that is the rule.  “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.”  “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.”

Note:  In the Central District of California, the pre-printed plan form states that the property does not revest when the plan is confirmed. 

August 26, 2008 in Other Circuit Briefs | Permalink

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