Machele Goetz v. Victor Weber
- Summarized by Jaden Banks , Nyemaster Goode P.C.
- 10 months 5 days ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- No. 23-2491 (8th Circuit, Mar 08,2024) Published
- Tag(s):
-
- Ruling:
- The Eighth Circuit Court of Appeals held that a post-petition increase in the debtor's equity in property in excess of the applicable homestead exemption, that occurs prior to conversion of the case from Chapter 13 to Chapter 7, becomes property of the bankruptcy estate.
- Procedural context:
- Machele Goetz (the "Debtor") filed a petition for bankruptcy relief under Chapter 13 of the Bankruptcy Code. Approximately two years later she moved to convert her case to one under Chapter 7. The bankruptcy court granted the motion to convert and the chapter 7 trustee liquidated the Debtor's residence. The Debtor moved to compel the Chapter 7 Trustee to abandon the equity in her residence that had accrued between the petition date and conversion date. The parties agreed that abandonment was appropriate unless the pre-conversion equity comprised property of the bankruptcy estate. The bankruptcy court found that the pre-conversion equity comprised property of the estate and the Debtor appealed. The Bankruptcy Appellate Panel for the Eighth Circuit affirmed and the Debtor appealed.
- Facts:
- The Debtor filed a bankruptcy petition in August 2020 and subsequently confirmed and maintained a Chapter 13 plan. In April of 2022, the Debtor moved to convert her case to Chapter 7. During the post-petition and pre-conversion period the Debtor had paid down her mortgage by approximately $960.00 and her residence had increased in value by approximately $75,000.00. That resulted in an increase in equity of approximately $62,000.00 net of the Missouri Homestead Exemption of $15,000.00 and sale costs and fees. The Debtor realized that the Chapter 7 Trustee would likely sell her residence, prompting her to file a motion to compel abandonment, in which she argued that the increased equity in her property belonged to the Debtor because it occurred while the residence was the debtor's property in her Chapter 13 case and did not become property of the estate upon conversion. The Chapter 7 Trustee opposed the motion, arguing in part that upon confirmation of a chapter 13 plan all of the bankruptcy estate vested into the Debtor, but upon conversion all of the Debtor's legal and equitable interests revest into the bankruptcy estate, including any increase in equity in the Debtor's property. The bankruptcy court rejected the Debtor's argument that the confirmation order for her Chapter 13 plan prevented that same property from becoming property of the estate upon conversion. The bankruptcy court also rejected the Debtor's argument that the equity comprised property acquired post-confirmation, which would be excluded from the estate upon conversion. The bankruptcy court held that the equity comprised property of the estate because it fell firmly within the definition of section 548 because it comprised property that belonged to the bankruptcy estate as of the petition date and remained within the possession or control of the Debtor upon conversion.
- Judge(s):
- SMITH, GRUENDER, SHEPHERD
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