Wu v. Markosian (In re Markosian)
- Summarized by Joel Newell , Spencer Fane LLP
- 10 years 1 month ago
- Citation:
- 9th Cir. BAP No. NC-13-1339-JuKiD
- Tag(s):
-
- Ruling:
- In the published opinion, the 9th Circuit BAP affirmed the bankruptcy court decision, the bonus was not property of the re-converted Chapter 7 estate. The BAP determined that 11 U.S.C. Sec. 1115 does not apply upon conversion from Chapter 11 to Chapter 7; however, 11 U.S.C. Sec. 348 governs the effect of a conversion. The BAP relied on 11 U.S.C. Sec. 348(a) wherein the date of the petition remains unchanged; therefore, "personal service income received during the Chapter 11 estate is recharacterized as property of the debtor under [11 U.S.C. Sec.] 541(a)(6) when the case is converted to chapter 7." Therefore upon conversion the bonus reverted back to the Debtors.
- Procedural context:
- Debtors filed bankruptcy in the Northern District of California. The Debtors filed a motion to to determine their interest in the bonus. The court denied the motion without prejudice so the Debtors may file a new motion to address whether the bonus was property of the Chapter 11 estate, and if so, whether it became property of the Chapter 7 estate. Debtors filed the motion to compel the Chapter 7 trustee to return the bonus as either partially exempt or excluded from the estate. The bankruptcy court ruled that the bonus constituted the Debtors' earnings and therefore property of the Chapter 11 estate; however, the bonus ceased being property of the estate upon conversion to Chapter 7. The Chapter 7 trustee appealed.
- Facts:
- Debtors voluntarily petition for relief under Chapter 7 of Title 11 of the United Stated Code. The Office of the United States Trustee moved to dismiss the Chapter 7 case based on the Debtors high income. The Debtors converted to Chapter 11. The Debtors remained in Chapter 11 for 2 years. After the 2 years, the Debtors re-converted to Chapter 7 based on the Joint Debtor having being no longer employed. Approximately one month after re-converting to Chapter 7, the Debtor received a bonus in the amount of $102,498.42. The Debtors turn the bonus over to the Chapter 7 trustee.
- Judge(s):
- JURY, KIRSCHER, and DUNN
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