In re Hudson, Bankruptcy No. 86-01172-BKC-GSE.
Decision Date | 19 January 1989 |
Docket Number | Bankruptcy No. 86-01172-BKC-GSE. |
Citation | 103 BR 781 |
Parties | IN re Rubin HUDSON, Debtor. Rubin HUDSON, Movant, v. LOWE'S OF MISSISSIPPI, d/b/a Lowe's of Greenwood, Respondent. |
Court | U.S. Bankruptcy Court — Northern District of Mississippi |
Solomon Osborne, Greenwood, Miss., for Rubin Hudson.
Linda W. Tate and Luke J. Schissel, Greenwood, Miss., for Lowe's of Mississippi.
Came on for consideration the motion filed by the above captioned debtor to avoid a judicial lien; response to said motion having been filed by the respondent, Lowe's of Mississippi, d/b/a Lowe's of Greenwood, hereinafter referred to as Lowe's or respondent; both parties being represented before the Court by their respective attorneys of record; and the Court having heard and considered same, hereby finds, orders and adjudicates as follows, to-wit:
I.
This Court has jurisdiction of the parties to and the subject matter of this proceeding pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. This is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(A), (K), and (O).
II.
The debtor has filed his motion to avoid a judicial lien which allegedly impairs an exemption to which he is entitled to claim under § 85-3-1(1)(a), Mississippi Code Annotated. The motion seeks the avoidance of the lien pursuant to 11 U.S.C. § 522(f)(1) which reads as follows:
The exemption, to which the debtor claims that he is entitled and which is allegedly impaired by the judicial lien, relates to a portion of the proceeds derived from the sale of a parcel of real property sold by the debtor on January 29, 1988, a date subsequent to the filing of this bankruptcy case. This portion of the sales proceeds, totaling $1,688.03, is also equivalent to the amount of the Lowe's judgment lien. The debtor contends that these monies are covered by the $10,000.00 personal property exemption set forth in § 85-3-1(1)(a), Mississippi Code Annotated.
III.
A chronology of the factual events leading up to the filing of the debtor's motion is set forth hereinbelow:
A. Lowe's was awarded a judgment against the debtor in the County Court of Leflore County, Mississippi, on March 26, 1985, in the sum of $1,688.03, plus interest to accrue at the highest lawful rate, in addition to its court costs. This judgment, subsequent to its enrollment, constituted a lien on the non-exempt real and tangible personal property owned by the debtor prior to filing this bankruptcy case, subject, however, to other valid liens having priority.
B. On August 15, 1986, the debtor filed a voluntary bankruptcy petition, seeking relief under Chapter 13 of the Bankruptcy Code.
C. On September 4, 1986, the debtor acquired the real property which is subject to the instant proceeding as a joint tenant with full rights of survivorship with Mary Hughes, a non-debtor. This property was never claimed as the homestead of the debtor, but this factor is irrelevant to the disposition of this proceeding. In addition, the debtor never listed this property as an asset in his bankruptcy schedules.
D. On March 23, 1987, an order was entered converting the Chapter 13 case to a liquidation bankruptcy under Chapter 7 of the Bankruptcy Code, followed by the appointment of a Chapter 7 trustee.
E. On July 8, 1987, the debtor received his discharge in the Chapter 7 case, and the case was subsequently closed on August 6, 1987.
F. On January 29, 1988, the debtor and the joint tenant, Mary Hughes, conveyed the subject property for the total sales price of $24,000.00. From the sales proceeds, the sum of $1,688.03, excluding accrued interest and costs, was escrowed in the closing agent's trust account pending the outcome of the instant dispute.
G. On June 20, 1988, the debtor filed his motion to avoid the judgment lien of Lowe's, claiming an exemption in the aforementioned escrowed funds and asserting that the judgment lien impaired this exemption.
IV.
Although not addressed specifically by the parties to this proceeding, the real issue that requires resolution is whether the real property, acquired subsequent to the filing of the Chapter 13 bankruptcy case, becomes property of the Chapter 7 bankruptcy estate following the conversion on March 23, 1987. If the property, in fact, is not property of the Chapter 7 estate, because of the effective date of filing, the Lowe's judgment lien, which arose prepetition, would not attach to property that the debtor acquired subsequent to filing. The issue actually turns on the question of what is the effective date for determining what constitutes property of the Chapter 7 estate upon conversion from Chapter 13, i.e., the date of the original filing of the Chapter 13 case or the date of the order converting the Chapter 13 case to a Chapter 7 case.
In the context of this proceeding, property of the Chapter 7 estate is defined in 11 U.S.C. § 541(a)(1) which provides, in part, that:
For Chapter 13 cases, the definition of property of the estate is found in 11 U.S.C. § 1306, which provides, in part, as follows:
In essence, 11 U.S.C. § 1306(a) merely expands 11 U.S.C. § 541(a) for Chapter 13 bankruptcy cases. In the instant case, it is clear that the real property acquired by the debtor subsequent to filing the Chapter 13 bankruptcy case, but prior to conversion, became property of the Chapter 13 bankruptcy estate. However, once the case was converted, does this same property become property of the Chapter 7 case? Hence, the relevant date for determining property of the estate becomes significant.
The effects of converting a bankruptcy case from one chapter to another are discussed in 11 U.S.C. § 348, which provides, in part, as follows:
The relevant date dilemma has been addressed in numerous bankruptcy cases, notably in In re Peters, 44 B.R. 68 (Bankr.M. D.Tenn.1984), where the debtors claimed that they were entitled to exempt certain undistributed funds paid to the Chapter 13 trustee, in furtherance of their confirmed Chapter 13 plan, following the conversion of their case to Chapter 7. The Chapter 7 trustee objected to the debtors' claim, but the Court held that the payroll deductions, paid into the bankruptcy estate subsequent to the commencement of the Chapter 13 case, did not become property of the Chapter 7 estate upon conversion since the appropriate date for determining what properties would be included in the Chapter 7 estate was the date of the filing of the original Chapter 13 petition, not the date of conversion. The following language extracted from the Peters opinion is informative:
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