Honorable Ralph B. Kirscher, Chief U.S. Bankruptcy Judge.
At Butte in said District this 14
In this Chapter 13 bankruptcy case, two contested matters are pending: (1) the Chapter 13 Trustee's motion for order compelling the Debtor to turn over and account for a postpetition inheritance (Docket No. 70); and (2) Trustee's motion to modify Debtor's confirmed Chapter 13 Plan (Docket No. 71) in order to increase payment to the class of unsecured creditors with the inheritance. Debtor Casey Rankin filed objections on the grounds that his inheritance cannot be property of the estate under 11 U.S.C. § 1306 for purposes of the "best interest of creditors" liquidation analysis of 11 U.S.C. § 1325(a)(4). A hearing on these matters was scheduled to be held on February 4, 2016. The Chapter 13 Standing Trustee Robert G. Drummond appeared. Debtor was represented by attorney Edward A. Murphy of Missoula. The parties agreed to submit these contested matters on stipulated facts and briefs. Based on the agreement of counsel the Court vacated the hearing and granted the parties time to file briefs, which have been filed and
This Court has exclusive jurisdiction of the above-captioned Chapter 13 bankruptcy under 28 U.S.C. § 1334(a). Modification of a confirmed plan and the Chapter 13 Trustee's motion for turnover are core proceedings under 28 U.S.C. §§157(b)(2)(E) and 157(b)(2)(L).
The parties filed a Stipulation of Facts on February 19, 2016, which provides the following agreed facts relating to these contested matters:
Docket No. 113.
The Trustee's motion for order compelling turnover of the Debtor's inheritance is based upon Dale v. Maney (In re Dale), 505 B.R. 8, 13 (9th Cir. BAP 2014), in which the Ninth Circuit Bankruptcy Appellate Panel ("BAP") held that a postpetition inheritance is property of the estate under § 1306(a)(1). The Trustee's motion to modify the confirmed Plan seeks modification only to increase funding of the Plan with the inheritance and, thus, increase the amount distributed to unsecured creditors.
Debtor's objection to the motion for turnover argues that, under 11 U.S.C. § 348(f)(1)(A), the estate of a case converted from chapter 7 to chapter 13 is composed only of assets held on the original petition date that remain in possession of the debtor, and that under the plain meaning of § 348(f)(2) and § 1306(b) the inheritance property cannot be property of the estate for purposes of the liquidation analysis, unless conversion was in bad faith. Debtor also objects that he needs the inheritance to pay for his cancer treatment and related expenses. Debtor objects to the Trustee's modified Plan for the same reasons and, in addition, on the grounds that the Court, under 11 U.S.C. § 1329(c), cannot approve a modification that extends beyond the three-year applicable commitment period required in this case under § 1325(b)(1)(B), as no cause exists for such an extension.
Section 1329(a) provides for modification of a plan after confirmation as follows:
The Debtor argues that nothing in the confirmed Plan or Order confirming the Plan requires the Debtor to turn over the inheritance, unless the Trustee can force a modification under § 1329. Section 1329(a), however, specifically authorizes the Chapter 13 Trustee to modify the Debtor's confirmed Plan in the instant case to increase the amount of payments to the unsecured creditors. When the language of a statute is plain, the sole function of the courts is to enforce it according to its terms unless the disposition required by the text is absurd. Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004). The Trustee's proposed amended Plan provides at paragraph 7B that the Debtor "shall turn over all of his inheritance from the estate of Anita E. Bartz as an additional payment under this Plan."
As for the timeliness of the Trustee's motion to modify plan, Debtor argues that the Chapter 13 Trustee's motion is untimely because it was filed after the Debtor made the last payment due under the Plan. Section 1329(c) provides:
Debtor argues that the 3-year commitment period for his plan expired on November 26, 2013, before Anita Bartz's death; thus, he had no right to the inheritance during the applicable commitment period. Debtor concedes that the 3-year duration can be increased up to 60 months for cause, but he argues that "cause should be focused on the debtor's needs, such as curing a mortgage arrearage and not on paying more money to creditors."
The Trustee's proposed Modified Plan has the same 60-month term as the Debtor's confirmed plan. Stipulated Fact No. 8. Under Section 1327(a), the provisions of a confirmed plan "bind the debtor and each creditor. . . ." Debtor proposed a 60-month plan even though his applicable commitment period was 36 months; his plan was confirmed. Under § 1327(a), confirmation binds the Debtor
A leading bankruptcy commentator writes that "courts have generally measured the time by which payments on the modified plan must end from the first payment due to be paid to the trustee on the original plan after confirmation of the plan, rather than from the first payment made by the debtor to the trustee before confirmation." 8 COLLIER ON BANKRUPTCY, ¶ 1329.07 (Alan N. Resnick & Henry J. Sommer, eds., 16th ed. 2015). The Court confirmed Debtor's Plan on January 21, 2011. Sixty months after the date of confirmation ended in January 2016, which is approximately three months after the Trustee filed his motions for turnover and to modify plan. The Chapter 13 Trustee filed his motions before the five-year limitation of § 1329(c) expired and filed them promptly after discovering the existence of the inheritance. Further, Stipulated Fact No. 10 states the date of Anita Bartz's death as March 2, 2014, which gave rise to Debtor's right to the inheritance.
Section 1329(c) authorizes this Court to provide for payment over a period of time that expires after the applicable commitment period of § 1325(b)(1)(B) "for cause." The Debtor filed his Chapter 13 petition and plan seeking a discharge of debt. His Schedule F lists unsecured claims in the total amount of $251,468.81. The confirmed plan provides at paragraph 2(g) that the total amount distributed under the modified Plan will be at least $14,000.00, which exceeds what would be available to pay unsecured claims if the Debtor's estate was liquidated under Chapter 7 of the Code.
The Trustee contends that Debtor should be equitably estopped from claiming the inheritance as his own when he failed to disclose it to the Chapter 13
The benefits of bankruptcy come with burdens and duties. The Debtor has been represented by experienced bankruptcy counsel since the commencement of this Chapter 13 bankruptcy case. A person who has consulted with an attorney "can be charged with constructive knowledge of the law's requirements." Stallcop v. Kaiser Found. Hosps., 820 F.2d 1044, 1050 (9th Cir.1987). This Court has written: "Debtors do have an obligation to provide additional information on assets covered by § 541(a)(5)
Rule 4002(a)(3) requires that a debtor "shall . . . (3) inform the trustee immediately in writing as to . . . the name and address of every person holding money or property subject to the debtor's withdrawal or order if a schedule of property has not yet been filed pursuant to Rule 1007)." Rule 1007(h) ("Interests Acquired or Arising After Petition") requires that if a debtor acquires or becomes entitled to acquire any interest in property, the debtor shall file a supplemental schedule in a chapter 13 case within 14 days after the information comes to the debtor's knowledge (or within such further time the court may allow), and that the "duty to file a supplemental schedule in accordance with this subdivision continues notwithstanding the closing of the case (except that the schedule need not be filed in a . . . chapter 13 case with respect to property acquired after entry of the order . . . discharging the debtor in a chapter 12 or 13 case)." In the instant case the Debtor was required under Rules 1007(h) and 4002(a)(3) to inform the Chapter 13 Trustee immediately about the inheritance and to file a supplemental schedule. Debtor failed to perform those duties.
Under equitable estoppel, "a person may be precluded from his act or conduct . . . from asserting a right which he otherwise would have had. . . ." Cobalis Corp. v. YA Global Invs. LP (In re Cobalis Corp.,) ___ Fed.Appx. ___, 2016 WL 715710, *1 (9th Cir.2016), quoting Hass v. Darigold Dairy Prods. Co., 751 F.2d 1096, 1099 (9th Cir.1995) (quoting Black's Law Dictionary 483 (5th ed. 1979)); see Hay v. First Interstate Bank of Kalispell, N.A., 978
Exhibit 2 is the statement of the personal representative of the estate of Anita Bartz to close informal probate and a final account. The final account is dated September 11, 2015, and includes a Schedule A, "Final Accounting," which states that Casey Rankin is entitled to a distribution in the amount of $54,206.02. Given Debtor's
Next, Debtor argues that § 1329(b) does not make the disposable income requirement of § 1325(b) apply to a proposed modification and, thus, the § 1325(b) requirement that all of Debtor's projected disposable income be applied to make payments to unsecured creditors does not apply. However, the Chapter 13 Trustee's motions do not seek turnover and distribution of the inheritance as disposable income, but rather they treat the inheritance as property. Further, the confirmed plan in paragraph 1 already submits the "future earnings and other income of the Debtor(s)" to the supervision and control of the Chapter 13 Trustee as necessary for the execution of the plan. Thus, whether income or property, the inheritance is submitted to the Chapter 13 Trustee's supervision in the confirmed plan.
Section 1329(b)(1) provides: "Sections 1322(a), 1322(b), and 1323(c) of this title and the requirements of section 1325(a) of this title apply to any modification under subsection (a) of this section. This provision incorporates into a proposed chapter 13 modification the liquidation analysis of § 1325(a)(4) which requires:
[T]he court shall confirm a plan if—
§ 1325(a)(4).
The Debtor argues that the plain meaning of § 348(f)(1)(A) and § 348(f)(2) requires upon conversion from chapter 13 to chapter 7: That the estate shall consist only of assets held on the original petition date remaining in possession of the debtor; and that the inheritance property cannot be property of the estate for purposes of the liquidation analysis unless conversion was in bad faith. The instant case, of course, has not been converted.
Courts generally avoid construing one provision in a statute so as to suspend or supersede another provision. Rake v. Wade, 508 U.S. 464, 471-72, 113 S.Ct. 2187, 124 L.Ed.2d 424 (1993). Section 1306(a)(1) provides: "Property of the estate includes, in addition to the property specified in section 541 of this title—(a) all property of the kind specified in such section that the debtor acquires 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 longstanding rule in this district is that, based on § 1306(a)(1), a chapter 13 bankruptcy estate includes interests in property acquired after the date of filing a chapter 13 petition. Alderman v. Martinson (In re Alderman), 195 B.R. 106, 109 (9th Cir. BAP 1996), citing In re Winchester, 46 B.R. 492, 495 (9th Cir. BAP 1984).
In this Court's 2015 decision In re Wirshing, the Court construed § 1306(a)(1) and § 541(a)(5)(A) and followed the BAP's reasoning in Dale and the Fourth Circuit in Carroll v. Logan, 735 F.3d 147, 150 (4th Cir.2013), that § 1306(a)(1) expanded the definition of property of the estate for chapter 13 purposes
This Court noted in Wirshing that the authoritative effect of a BAP decision is an open question, but that at the very least this Court considers Ninth Circuit BAP decisions to be persuasive authority. 2015 WL 3525061 at *3. As in Wirshing, under this Court's longstanding rule the Court concludes that the Debtor's "post-petition inheritance is property of the estate under § 1306(a)(1) with which the Chapter 13 Trustee is authorized to modify the confirmed Plan to increase the amount of payments on claims under § 1329(a)." Id.
