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George Czaplinski v. Bank of America

Summarizing by Kristin Jain

In re Richard Black

Case Type:
Consumer
Case Status:
Reversed
Citation:
BAP No. NV-18-1351-FBH (9th Circuit, Dec 31,2019) Published
Tag(s):
Ruling:
1) A bankruptcy court cannot alter the "chapter 13 bargain" by confirming a modification to a debtor's chapter 13 plan, over the debtor's objection, that captures the appreciation to a debtor's real property and uses that appreciation to pay the debtor's prepetition creditors. 2) A chapter 13 plan can be timely modified anytime before the conclusion of the confirmed plan, regardless of whether the debtor could have filed a plan with a shorter term.
Procedural context:
A chapter 13 debtor sold property, for more than the property was scheduled for, after three years into the debtor's chapter 13 plan. The chapter 13 trustee amended the debtor's plan, with the court's permission, to include the surplus sale proceeds in the chapter 13 estate and to commit the proceeds to pay the debtor's creditors. The bankruptcy court, over the debtor's objection, approved the Trustee's modified plan. The debtor appealed.
Facts:
Mr. Black, without counsel, filed a chapter 7 bankruptcy petition that scheduled real property in Las Vegas, Nevada (the “Property”), valued at $52,300. He claimed a $52,300 homestead exemption in the Property. Mr. Black received his chapter 7 discharge. Shortly thereafter, Mr. Black (now with counsel) moved to convert his chapter 7 case to one under chapter 13. Among other reasons, he stated that, when he initially filed his chapter 7 petition, he did not realize that he could lose the Property. The chapter 7 trustee opposed the motion to convert. Before ruling on the motion to convert, the bankruptcy court sustained the chapter 7 trustee’s objection to the claimed homestead exemption in the Property and granted the motion for turnover. The bankruptcy court later granted Mr. Black’s motion to convert. Mr. Black filed amended schedules. He identified the Property as a rental property and decreased its value to $44,000. Mr. Black filed his proposed chapter 13 plan, proposing to pay $250 per month for fifty-nine months ($14,750). He proposed an additional payment of $41,000 in the fourth year upon sale or refinancing of the Property. The Chapter 13 Trustee ("Trustee") objected to confirmation of the plan. The Trustee argued that the Plan failed to meet liquidation value under 11 USC § 1325(a)(4) based on the (non-exempt) Property. Black filed an amended plan that increased the lump sum payment for the Property to $45,000. As a below-average-income debtor, his applicable commitment period was three years. The plan also provided that “[a]ny property of the estate scheduled under § 521 shall vest in Debtor upon confirmation of this Plan.” The Trustee did not object to the amended plan, and the court confirmed the plan. Mr. Black faithfully made his monthly plan payments. About three years later, Mr. Black filed a motion to sell the Property (“Motion to Sell”). He stated that he intended to sell the Property for $107,000, pay $45,000 to his unsecured creditors, and retain $50,689 (the remaining amount after costs of sale) for himself. The Trustee objected to Black's retention of excess proceeds, arguing that the excess proceeds were property of the chapter 13 estate under §§ 541 and 1306(a)(1) and Black's failure to claim an exemption in the excess proceeds. The bankruptcy court approved the sale, ordered Black to turn over $49,000 of the sale proceeds to the Trustee, and that Black's attorney should hold the excess funds pending further order of the court. (The extra $4,000 was to cover the monthly plan payments that Black would have made under the Plan.) The bankruptcy court then received briefing and ultimately approved the Trustee's amended chapter 13 plan.
Judge(s):
FARIS, BRAND, and HERCHER (the Honorable David W. Hercher, U.S. Bankruptcy Judge for the District ofOregon, sitting by designation)

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