In re Wilson

555 B.R. 547, 2016 Bankr. LEXIS 2852, 2016 WL 4203060
CourtUnited States Bankruptcy Court, W.D. Louisiana
DecidedAugust 5, 2016
DocketCASE NO. 11-81519
StatusPublished
Cited by9 cases

This text of 555 B.R. 547 (In re Wilson) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Wilson, 555 B.R. 547, 2016 Bankr. LEXIS 2852, 2016 WL 4203060 (La. 2016).

Opinion

REASONS FOR DECISION

JOHN W. KOLWE, UNITED STATES BANKRUPTCY JUDGE

The debtor in this Chapter 13 case, Clyde Wilson, acquired a post-confirmation cause of action as the result of an auto accident. A settlement of this claim has been reached that will net Wilson $74,067.52. There are two proposals be[549]*549fore the court for the disposition of a portion of these funds. The first, proposed by Wilson in an Application to Ratify Compromise, Ratify Attorney Fees and Prepay Base, calls for $2,631.14 to be used to pay the remaining balance due under his existing confirmed plan. Under this proposal, Wilson will exit his bankruptcy case with not only a discharge, but also with $71,436.38 and prepetition creditors being paid zero. Wilson contends that prepayment is appropriate in this case because the liquidation analysis provided by 11 U.S.C. § 1325(a)(4) (also known as the “best interests of the creditors test”) was satisfied at the time his plan was originally confirmed, such that the unsecured creditors will receive an amount at least equal to what they would have received if the case had originally been filed as under Chapter 7. Wilson also claims he needs all of the settlement proceeds remaining after he pays off his plan for his maintenance and support.

The second proposal, which is advocated by the Chapter 13 Trustee in a Motion to Modify the plan, requires Wilson to pledge $11,744.54 of the settlement proceeds to pay the remaining balance of his plan payments, and increase the dividend to the unsecured class to pay 100% of all allowed unsecured claims. Under this proposal, Wilson will exit his bankruptcy case with a discharge, $62,322.98, and with his allowed unsecured creditors being paid in full. The Trustee’s argues that the post-confirmation cause of action is property of the Chapter 13 estate, and the best interests of the creditors test must be redetermined as of the date of the Trustee’s proposed modified plan.

The hearing on these competing proposals was held on May 5, 2016. Following the hearing, and for the reasons stated on the record, the Court indicated it was inclined to grant the Trustee’s Motion and deny Wilson’s Application to the extent it sought to prepay his plan. However, the hearing on these matters was continued to May 19, 2016 to allow Wilson to present evidence supporting his contention that he needed the entirety of the settlement proceeds for his maintenance and support. At the request of the parties, the hearing was again continued to June 2, 2016. At the June 2 hearing, the parties notified the court that there would be no additional evidence on the maintenance and support question, and submitted that the case was ripe for decision by the court.

Background

Wilson filed for relief under Chapter 13 of the Bankruptcy Code on November 4, 2011. His plan was confirmed on March 20, 2012; it required Wilson to make three monthly payments of $225, and 57 payments of $270, resulting in a plan base of $16,065. The plan provides that unsecured creditors will receive a minimum of 0% of their claims. At the time of confirmation, the liquidation test of § 1325(a)(4) was satisfied because the bankruptcy estate did not have any non-exempt property that could be liquidated. As a result, the amount that would be paid to the unsecured creditors under the plan was not less than the amount that would be paid if the estate was liquidated.

Three years later, on or about July 25, 2015, Wilson was involved in a car accident. On August 25, 2015 he amended Schedule B to disclose the potential cause of action stemming from the accident. On November 2, 2015, he filed an application to appoint special counsel, Joseph Beck and the firm of Hunter & Beck, to represent him in that litigation; the application was approved by the court on December 3, 2015. Special counsel negotiated a settlement of the cause of action. The total settlement amount is $196,845, and after [550]*550payment of all fees and expenses, Wilson will receive $74,067.52.

The total amount of the settlement, and the deductions for fees and other costs from that total, are not disputed, and are therefore approved. Wilson’s request to use $2,631.14 of the settlement proceeds to prepay his confirmed plan, and the trustee’s competing motion to modify to require that $11,744.52 of the settlement proceeds be set aside to pay all allowed unsecured claims in full, are the remaining points of contention.

Law and Analysis

Determining Property of the Chapter 13 Estate after Confirmation

This analysis begins with a determination of whether the proceeds of Wilson’s post-confirmation cause of action are property of the bankruptcy estate. “This determination is especially important as ‘a bankruptcy court has no jurisdiction to entertain a motion by a trustee or creditor under § 1329 seeking to take property acquired by a debtor after confirmation unless the court concludes the property is property of the bankruptcy estate rather than the debtor.’ ” In re Wetzel, 381 B.R. 247, 252 (Bankr.E.D.Wis.2008), quoting In re Forte, 341 B.R. 859, 865 (Bankr.N.D.Ill.2005). But, identifying property comprising a Chapter 13 bankruptcy estate after plan confirmation is not uncomplicated, where, as in this case, property of the estate vests in the debtor at confirmation.

The complications are best illustrated by the code provisions themselves. Three sections of the Bankruptcy Code must be consulted to determine whether property acquired by a debtor post-confirmation is property of the estate: §§ 541, 1306 and 1327. Section 541 defines property of the estate as of the commencement of a bankruptcy case, and it includes, among other items, “all legal or equitable interests of the debtor in property.” 11 U.S.C. § 541(a)(1). It is well settled that “‘all legal or equitable interests of the debtor in property* includes causes of action belonging to the debtor at the time the case is commenced.” Louisiana World Exposition v. Federal Ins. Co., 858 F.2d 233, 245 (5th Cir.1988) (citations omitted). In Chapter 13 cases, “property of the estate” includes not only § 541 property as of the commencement of the case, but also “all property of the kind specified in [§ 541] that the debtor acquires after commencement of the case but before the case is closed, dismissed or converted ... whichever occurs first.” 11 U.S.C. § 1306(a)(1). Under this expanded definition, a cause of action acquired by a debtor after the case was filed, but before closure, dismissal or conversion, is property of the estate and thus may be subject to administration by the court in accordance with the Bankruptcy Code.

It is not until § 1327 is thrown into the mix that the complications become evident. This provision provides, in part: “Except as otherwise provided in the plan or the order confirming the plan, the confirmation of the plan vests all of the property of the estate in the debtor ... free and clear of any claim or interest of any creditor provided for by the plan.” 11 U.S.C. § 1327(b) and (c).

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Cite This Page — Counsel Stack

Bluebook (online)
555 B.R. 547, 2016 Bankr. LEXIS 2852, 2016 WL 4203060, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-wilson-lawb-2016.