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  • Sarah Little

Property that Re-Vests on Confirmation is Not Property of the Estate in Chapter 13

In In re Black, the 9th Circuit BAP overturned the bankruptcy court and held that a Chapter 13 Trustee cannot modify a chapter 13 plan to require debtors to turnover proceeds from the sale of their real property that re-vested with the debtors when their plan was confirmed if not provided for by the confirmed plan.

The Debtor's schedules valued the property at $44,000 and provided for a $45,000 payment from proceeds of the sale of the the property to occur in the 4th year of the plan. The property sold for $107,000 and the Chapter 13 Trustee tried to require, through a plan modification, the debtor to turnover all the proceeds, because the property was not exempt. The Trustee argued post-petition appreciation was property of the estate pursuant to Section 1306(a)(1) or section 541(a)(6). The court held that section 1327(b) is controlling, which provides that confirmation of the plan re-vests property in the debtor free and clear of any claim or interest of any creditor provide for the plan. Post-petition appreciation therefore did not accrue from estate property and belonged to the Debtors. See opinion here.

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