United States Bankruptcy Appellate Panel of the Ninth Circuit
In re: RICHARD L. BLACK, Debtor.
KATHLEEN A. LEAVITT, Chapter 13 Trustee, Appellee. RICHARD L. BLACK, Appellant,
and Submitted on November 21, 2019 at Las Vegas, Nevada
from the United States Bankruptcy Court for the District of
Nevada Honorable August Burdette Landis, Bankruptcy Judge,
Christopher Burke argued on behalf of appellant
Richard L. Black; Sarah E. Smith argued on behalf of appellee
Kathleen A. Leavitt, Chapter 13 Trustee.
Before: FARIS, BRAND, and HERCHER, [*] Bankruptcy Judges.
Richard L. Black obtained confirmation of a chapter
plan that required him to pay $45, 000 to his creditors when
he sold or refinanced his rental property. About three years
later, he sold the property for $107, 000. He proposed to pay
$45, 000 to his creditors and to retain the excess sale
proceeds for himself. Chapter 13 trustee Kathleen A. Leavitt
("Trustee") moved to modify Mr. Black's
confirmed plan to require him to pay the excess sale proceeds
to his unsecured creditors. The bankruptcy court approved the
Black appeals, arguing that he was not required to commit the
excess proceeds to his plan payments. He also argues that the
Trustee's motion was untimely and that the modified plan
did not meet the statutory requirements for plan
that the Trustee's modified plan was timely and complied
with the applicable statutes. But we agree with Mr. Black
that he was entitled to retain the excess sale proceeds.
Accordingly, we REVERSE.
Mr. Black's bankruptcy case
April 9, 2014, Mr. Black filed a chapter 7 bankruptcy
petition that he prepared with the assistance of a bankruptcy
petition preparer. He scheduled real property located in Las
Vegas, Nevada (the "Property"), valued at $52, 300.
He claimed a $52, 300 homestead exemption in the
chapter 7 trustee objected to Mr. Black's claimed
homestead exemption in the Property, which he did not live
in, but rented out at $850 per month. He also moved for
turnover of the rental proceeds as nonexempt assets.
Black received his chapter 7 discharge. Shortly thereafter,
Mr. Black (through counsel) moved to convert his chapter 7
case to one under chapter 13. Among other reasons, he stated
that, when he initially filed his chapter 7 petition, he did
not realize that he could lose the Property. The chapter 7
trustee opposed the motion to convert.
ruling on the motion to convert, the bankruptcy court
sustained the chapter 7 trustee's objection to the
claimed homestead exemption in the Property and granted the
motion for turnover. The bankruptcy court later granted Mr.
Black's motion to convert.
Black filed amended schedules. He identified the Property as
a rental property and decreased its value to $44, 000.
The chapter 13 plan
Black filed his proposed chapter 13 plan in which he proposed
paying $250 per month for fifty-nine months, totaling $14,
750. He proposed an additional payment of $41, 000 in the
fourth year upon sale or refinancing of the Property.
Trustee objected to confirmation of the plan. Among other
things, she argued that "[t]he Plan fails to meet
liquidation value [11 USC § 1325(a)(4)] based on the
following non-exempt property: $44, 000 Rental
response, Mr. Black filed an amended plan to address concerns
not relevant to this appeal. He still proposed to pay $250
per month for fifty-nine months. But he increased to $45, 000
the lump sum payment upon sale or refinancing of the
below-average-income debtor, his applicable commitment period
was three years. The plan provided:
Monthly payments must continue for the entire commitment
period unless all allowed unsecured claims are paid in full
in a shorter period of time, pursuant to §
1325(b)(4)(B). If the applicable commitment period is 3
years, Debtor may make monthly payments beyond the commitment
period as necessary to complete this plan, but in no event
shall monthly payments continue for more than 60 months.
plan also provided that "[a]ny property of the estate
scheduled under § 521 shall vest in Debtor upon
confirmation of this Plan."
Trustee did not object to the amended plan, and the court
confirmed the plan. Mr. Black faithfully made his monthly
plan payments for several years.
The sale of the Property
three years later, Mr. Black filed a motion to sell the
Property ("Motion to Sell"). He stated that he
intended to sell the Property for $107, 000, pay $45, 000 to
his unsecured creditors, and retain $50, 689 (the remaining
amount after costs of sale) for himself.
Trustee opposed the Motion to Sell. She stated that she did
not object to the sale of the Property but objected to Mr.
Black retaining any of the proceeds of the sale. She argued
that the proceeds were property of the chapter 13 estate
under § 541 as "property that the debtor
'acquires after commencement of the case but before the
case is closed, dismissed, or converted'" under
§ 1306(a)(1). She stated that Mr. Black did not claim an
exemption in the Property, so he must turn over all funds
stemming from the sale of the Property to the Trustee for
distribution to creditors.
bankruptcy court found that the Property was property of the
estate and that the sale was a reasonable exercise of Mr.
Black's business judgment. It granted the Motion to Sell
("Sale Order") and ordered that $49, 000 should be
paid to the Trustee and that the remaining funds should be
held by Mr. Black's attorney pending further order of the
The Trustee's motion to modify the plan
Trustee filed Modified Chapter 13 Plan #3 ("Modified
Plan"), which amended Sections 1.08, 1.09, and 1.10 of
the confirmed plan to commit the additional $52, 000 sale
proceeds to the plan. As such, the estate would receive: (1)
the fifty-nine monthly payments of $250 per month, (2)$49,
000 from the sale of the Property pursuant to the Sale Order,
and (3)the additional $52, 000 sale proceeds. She stated that
the Modified Plan would require Mr. Black to "pay all
disposable income to the Plan for the plan term as well as
turn over non-exempt property of the estate. The increased
payment will result in an additional distribution to filed
and allowed non-priority general unsecured creditors."
Black objected to the Modified Plan. He argued that the
Modified Plan did not comply with §§ 1329, 1322,
and 1325 because it "does not propose a new plan payment
or plan length. It only adds or adjusts a few sections of the
plan. In other words, a debtor could not propose a
modification in this way and have it confirmed."
argued that the proposed modification was untimely, because
he had completed his plan payments. He was only required to
complete a 36-month plan under § 1322(d)(2)(A) but
agreed to a 59-month plan. He was forty-eight months into his
plan term when he sold the Property and paid the Trustee the
remaining balance due under the plan from the sale proceeds.
Thus, he completed his plan, and the Trustee cannot modify a
he argued that, under McDonald v. Burgie (In re
Burgie), 239 B.R. 406 (9th Cir. BAP 1999), the sale
proceeds were not disposable income that he must commit to
the plan, and he cannot be compelled to use the proceeds of
the postpetition ...