In re: Francisco Infante Ramon

Opinion

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2 3 IN RE: : CASE NO. 08-1293 (ESL) 4 : FRANCISCO INFANTE RAMON : CHAPTER 7 5 : : 6 Debtor : ____________________________________: 7 OPINION AND ORDER 8 There are two interrelated matters pending before this court. The first is the Chapter 7 9 trustee’s objection to debtor’s claim of exemptions and debtor’s opposition thereto. The second is 10 the debtor’s opposition to the “trustee’s sine die continuance and request to deem §341 meeting 11 closed.” The motion to deem the 341 meeting closed stands unopposed. 12 The Chapter 7 trustee objects to the amended claim of exemptions filed by the debtor on 13 September 9, 2011 over an undisclosed post petition extrajudicial personal injury settlement. The 14 debtor claimed an exemption in the amount of $4,000 for attorneys fees collected without court 15 authorization; and $16,000 for an award of damages resulting from pain and suffering. The Chapter 16 7 trustee alleges, and the record corroborates, that the amendment was made after the Chapter 13 17 trustee had filed an objection to debtor’s amended claim of exemptions. The Chapter 13 trustee’s 18 objection to exemptions was filed on July 21, 2011 and the debtor voluntarily converted the case to 19 Chapter 7 on August 3, 2011. The debtor answered the Chapter 13 trustee’s objection to exemptions 20 on August 25, 2011. The debtor subsequently, that is, on September 9, 2011 filed amended 21 schedules, including an amended schedule C (Exemptions). 22 The Chapter 7 trustee alleges that the exemption over the attorney’s fees in the amount of 23 $4,000 exceeds the amounts allowed under 11 U.S.C. § 522(d)(5). The Chapter 7 trustee further 24 alleges that the debtor has not presented any evidence of the quantification of damages in order that 25 the debtor may claim an exemption under 11 U.S.C. § 522(d)(11)(D). 26 The debtor opposes the Chapter 7 trustee’s objection to exemptions on three grounds: first, 27 the assets claimed as exempt under the Chapter 13 case are not property of the Chapter 7 estate; 28 second, even if the assets are part of the Chapter 7 estate, the objection is late as having been filed 1 beyond the thirty (30) day limitation period in Rule 4003(b) of the Fed. R. Bankr. P., and, third, that 2 Chapter 7 trustee has not met the burden to show that the debtor did not suffer the personal injury 3 damages claimed and, thus, an evidentiary hearing is necessary. Debtor’s amended opposition 4 |jexpands his legal support to state that after considering the effects of a conversion to chapter 7, as set 5 in 11 U.S.C. § 348()\(1(A) the postpetition cause of action is not property of the Chapter 7 6 |jestate. 7 DISCUSSION 8 A. Adjournment/Closing of the 341 Meeting of Creditors 9 Section 341(a) of the Bankruptcy Code, 11 U.S.C. § 341(a), requires that a meeting of 10 |Icreditors be convened "{w}ithin a reasonable time after the order for relief." Rule 2003(a) of the Fed. 11 Bankr. P. provides the time frame within which a meeting of creditors must be scheduled for each 12 ||chapter under which a bankruptcy petition may be filed. Rule 2003(e) states that "[t]he meeting may 13 be adjourned from time to time by announcement at the meeting of the adjourned date and time 14 [without further written notice." Rule 2003(e) specifically requires that the date and time to which the 15 meeting of creditors is adjourned be announced at the meeting. A chapter 7 trustee may not hold the 16 |Imeeting open indefinitely or sine die as such a continuance will unduly prolong the time to object 17 the debtor's claimed exemptions. In re Newman, 428 B.R. 257 (B.A.P. Ist Cir. 2010). See also 18 re Cushing, 401 B.R. 528 (B.A.P. 1st Cir. 2009). The 30-day period set forth in Rule 4003(b)(1) 19 the trustee to object to a debtor's claim of exemptions must be strictly interpreted. In re Kuhnel, 20 495 F. 3d 1177 (10th Cir. 2007). 21 Trustees should continue or adjourn a meeting of creditors following Rule 2003(e). The date 22 time of the adjourned meeting must be specified in the meeting minutes. Otherwise, the meeting 23 be deemed closed. In chapter 13 cases, as was the case in In re Cushing, this ruling may operate 24 llagainst the debtor and cause the dismissal of the petition. In chapter 7 cases, as was the case in In re 25 Newman, the debtor may benefit by enforcing the 30-day period to object to exemptions set forth in 26 ||Rule 4003(b)(1). In view of the above, the court hereby grants debtor’s request to deem the 341 27 meeting closed as of September 13, 2011. 28 Although the court has granted debtor's motion to deem the 341 meeting closed as of the

1 conclusion of the examination of the debtor on September 13, 2011, the facts of this case do not move 2 the court to apply the same to bar the trustee's motion objecting to debtor's claim of exemptions over 3 proceeds of a post petition extrajudicial personal injury settlement not promptly disclosed while the 4 case was under chapter 13 for having been filed late. The court notes that the objection to exemptions 5 was filed on the same date as the virtual entry indicating that the 341 meeting of creditors was 6 continued sine die. The sequence and timing of critical events in this case should not thwart the 7 Chapter 7 trustee's objection on the ground that it was filed (October 30, 2011) after the 30 days after 8 the court now has ordered the 341 meeting deemed concluded (October 13, 2011). 9 The case was filed on March 3, 2008 under Chapter 13. On June 16, 2008 the court entered 10 an order confirming debtor's Chapter 13 plan. A request for post confirmation modification under 11 section 1329 was granted on September 18, 2009. On April 13, 2010 the court granted debtor's 12 second request for a post confirmation modification. On June 16, 2011 the debtor filed amended 13 schedules B and C, to include and exempt a post petition extra judicial claim and settlement with Real 14 Legacy Assurance for damages suffered on April 12, 2010. The Chapter 13 trustee moved the court 15 on June 22, 2010 to order the debtor to file, and notify documents relative to the settlement. The 16 Chapter 13 trustee also requested on June 22, 2011, and the court granted, an extension to file an 17 objection to the exemption over the settlement proceeds. On July 1, 2011 the debtor filed an amended 18 schedule C. On July 21, 2011 the Chapter 13 trustee filed an objection to the amended claim of 19 exemptions. On August 3, 2011 the debtor filed a notice of conversion from chapter 13 to chapter 20 7. The debtor also requested an extension of time to answer the Chapter 13 trustee's objection to 21 exemption, that is, on the same day that the case was being converted to chapter 7. The debtor's 22 response to the Chapter 13 trustee's objection to exemption was filed on August 25, 2011, that is, six 23 days after the Chapter 13 trustee had filed his final report on a converted case; and nine days after the 24 court had noticed the conversion to chapter 7 and had scheduled the 341 meeting of creditors under 25 chapter 7 for September 8, 2011. 26 On August 20, 2011 the debtor (not the Chapter 7 trustee) gave notice that the 341 meeting 27 had been rescheduled to September 13, 2011. On September 9, 2011 the debtor filed amended 28 schedules A, B, C, I an J, as well as an amended statement of financial affairs. On the same date of 3 1 The amended schedules and statement of financial affairs were filed on the same date of the originally 2 scheduled 341 meeting under chapter 7. The trustee continued the meeting of creditors for September 3 13, 2011. The minutes of the September 13, 2011 341 meeting showing that the meeting was 4 continued sine die were filed on October 30, 2011, the same date that the Chapter 7 trustee renewed 5 the objection to exemptions which had been filed by the Chapter 13 trustee. 6 In view of the foregoing, the court denies the debtor’s request to find that the Chapter 7 7 trustee’s objection to exemptions was filed late. The timing and sequence of events in the case as it 8 relates to an undisclosed asset of the chapter 13 estate, the claiming of an exemption of the same, the 9 timely filing by the Chapter 13 trustee of an objection to exempting the settlement proceeds, and the 10 renewal by the Chapter 7 trustee of the objection to exemptions filed by the Chapter 13 trustee so 11 warrant. Consequently, the court proceeds to consider the merits of the objection to exemptions. 12 B. Property of the Estate and Exemptions 13 All property in which the debtor has a legal or equitable interest becomes property of the estate 14 upon the commencement of a bankruptcy case. 11 U.S.C. § 541(a)(1). The debtor may exempt 15 property of the estate in the amounts and for the items specified in 11 U.S.C. § 522. The property 16 claimed as exempt by the debtor is not distributed to creditors, Taylor v. Freeland & Kronz, 503 U.S. 17 638, 642 (1992), as the exempted interest in the property is no longer part of the bankruptcy estate. 18 11 U.S.C. § 522(l); Owen v. Owen, 500 U.S. 305 (1991). Property claimed as exempt vests in the 19 debtor. In re Cunningham, 513 F.3d 318, 324 (1st Cir. 2008). Exemptions are determined as of the 20 date of the filing of the bankruptcy petition. In re Cunnigham, 513 F. 3d at 324. The exemption 21 provisions are part of the statutory design to provide debtors with a fresh start. Rousey v. Jacoway, 22 544 U.S. 320, 322, 325 (2005). The property that a debtor may claim as exempt is property that is 23 property of the estate upon the commencement of the bankruptcy case, that is, on petition date. 24 The instant case was commenced as a voluntary petition under Chapter 13 of the Bankruptcy 25 Code on March 3, 2008. The definition of property of the estate under Chapter 13 is broader than 26 under Chapter 7. See 11 U.S.C. § 1306. Property of the estate in a chapter 13 case includes, in 27 addition to the property specified in section 541 of the Bankruptcy Code, all property that the debtor 28 acquires after the commencement of the case but before the case is closed. 11 U.S.C. § 1306 (a)(1). 4 1 A prepetition cause of action is property of the estate under section 541, and any amounts recovered 2 by the debtor after the commencement of the case and before the case is closed is also property of the 3 estate in a Chapter 13 case pursuant to section 1306. A postpetition cause of action in an open Chapter 4 13 case is property of the estate. 5 However, the case was voluntarily converted to Chapter 7 on August 3, 2011. Section 348 6 of the Bankruptcy Code provides for the effect of conversion. The conversion of a case “does not 7 effect a change in the date of the filing of the petition, the commencement of the case, or the order 8 for relief.” 11 U.S.C. § 348(a). The exceptions to this general rule, included in subsections (b) and 9 (c) of section 348 are not relevant to this case. The effect of conversion on property of the estate is 10 set forth in section 348 (f), which states as follows: 11 (f) (1) Except as provided in paragraph (2), when a case under chapter 13 of this title is converted to a case under another chapter under this title— 12 (A) property of the estate in the converted case shall consist of property of the estate, as of the date of filing of the petition, that remains in the possession of or is under the control of the debtor on 13 the date of conversion; (B) . . . 14 (C) . . . (2) If the debtor converts a case under chapter 13 of this title to a case under 15 another chapter under this title in bad faith, the property of the estate in the converted case shall consist of the property of the estate as of the date of conversion. 16 The case was converted from chapter 13 to chapter 7 on August 3, 2011. As of this date, there 17 are no allegations by any party in interest that the case was converted in bad faith. Consequently, the 18 provisions of § 348 (f)(2) are not applicable to the contested matter before the court. What is property 19 of the estate in this case converted from chapter 13 to chapter 7 is whatever was property of the estate as of petition date, that is, March 3, 2008. The determination hinges on section 541 and not the 20 expanded provisions of section 1306. In re Young, 66 F. 3d 376 (1st Cir. 1995). 21 The damages were suffered on April 12, 2010, well after 180 days after petition date. 22 Therefore, the same are not property of the chapter 7 estate. 11 U.S.C § 541 (a)(5). The settlement amounts were also received after 180 days from petition date. Consequently, the same are not property 23 of the chapter 7 estate, and there is no need to claim as exempt the settlement amounts because the same 24 are not property of the estate. 25 26 27 28 5 1 CONCLUSION 3 In view of the foregoing, the Chapter 7 trustee’s objection to exemptions is hereby denied as the property being claimed as exempt is not property of the Chapter 7 estate. SO ORDERED. In San Juan, Puerto Rico, this 17" day of April, 2012.

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