Chapter 7 Conversion: In Re Tina M. Lang

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U.S. Bankruptcy Court, WDNY

Chapter 7 Conversion

Post-Filing Depreciation

In Re Tina M. Lang
05-16767
Judge Bucki
 
Background: The Chapter 7 trustee moved to compel the debtor to turn over $7,250, the non-exempt value of an automobile as of the date of the filing of her case in Chapter 13. The central issue concerns whether the debtor must account for that value even after the conversion of her case to Chapter 7. Tina M. Lang filed a petition for relief under Chapter 13 of the Bankruptcy Code on Aug. 10, 2005. In schedules, she reported ownership of two principal assets: a 1999 Ford Expedition vehicle and a residence in Dunkirk, N.Y. At the time of filing, the debtor estimated the value of her automobile at $9,650 and the value of her residence at $25,000. Although she owned the automobile free and clear of any lien or encumbrance, the residence was subject to a mortgage held by U.S. Bank National Association. In a proof of claim dated Sept. 1, 2005, the servicer for U.S. Bank indicated an outstanding mortgage indebtedness of $32,667,  which included arrears of $12,854. The primary purpose of the debtor’s Chapter 13 plan was to cure the mortgage arrears, thereby protecting the homestead from foreclosure.

Ruling: The bankruptcy estate in Chapter 7 will include only the value of assets as of the date of conversion from Chapter 13, including the further depreciated vehicle. The court denies the trustee’s motion to compel the debtor to pay the amount of a prior valuation of her automobile. Any alternative request for a turnover of the automobile also is denied, but without prejudice to a new application for turnover after the trustee has considered whether the car’s probable non-exempt value is sufficient to justify administration.

Thomas J. Gaffney, Chapter 7 trustee; Peter D. Grubea for the debtor