Gebhart v. Gaughan (In re Gebhart)

Citation:
2010 WL 3547641
Tag(s):
Ruling:
The dollar amount of the Debtor's claimed exemption is frozen as of the petition date. However, the estate is entitled to post-petition appreciation in the exempt asset until the bankruptcy case is closed or the estate abandons the property.
Procedural context:
Appeal from an order appointing a real estate broker to sell the Debtors' residence and denying the Debtors' Motion for Abandonment.
Facts:
This is case a consolidated appeal from Nikalous Gebhart's Chapter 7 petition and Steven and Julie Chappell's Chapter 7 petitions. In the Gebhart case, the Debtor filed for Chapter 7 bankruptcy protection in Arizona on August 8, 2003 at the time of the petition he claimed a homestead exemption in the amount of $89,703 (his residence had a market value of $210,000 and was encumbered by mortgages in the amount of $120,297). The Debtor received his discharge on December 12, 2003, however, the bankruptcy case was not closed. The Debtor remained in his house and remained current on his mortgage payments. On November 10, 2006 the Trustee asked the bankruptcy court to approve the appointment of a real estate broker to sell the home for the benefit of the creditors as the Trustee believed the house had appreciated greatly since the petition date. The Debtor moved for the estate to abandon the house. The Court ruled in favor of the Trustee and denied the Debtor's Motion. The District Court affirmed. In the Chappell case, the Chapells filed for Chapter 7 bankruptcy protection in Washington on June 30, 2004. At the time of filiing the Debtors had $21,511of equity in their house. The Chappells received their discharge on October 21, 2004, but their case was not closed. On July 7, 2006, the Debtors had fallen into default on their house and the mortgage holder moved for relief from stay to foreclose. The Trustee argued that the value of the homestead had increased since the petition date and moved the court to sell the property and keep the excess recovered for the benefit of the estate. The Bankruptcy Court ruled the homestead had passed out of the estate when the Debtors had claimed their equity as exempt and the Trustee failed to object. The BAP reversed the bankruptcy court finding that the postpetition appreciation in the homestead belonged to the estate.
Judge(s):
TASHIMA and BERZON, Circuit Judges, TIMLIN, Disctrict Judge sitting by designation.

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