A recent case out of the 9th Circuit, In re Dale, revives a controversial subject for Chapter 13 debtors: whether an inheritance received more than 180 days after commencement of the case is part of the bankruptcy estate. Ultimately the 9th Circuit agreed with the 4th Circuit that while inheritance that debtor received more than 180 days after petition date would not have been included in bankruptcy estate had debtors instead filed for relief under Chapter 7, it was included in expanded definition of “property of the estate” applicable in Chapter 13 cases.
What does this mean for creditors? In defining property of the Chapter 13 estate as “all property of the kind” specified in general definition of “property of the estate” that Chapter 13 debtor acquired after commencement of case and before case was closed, dismissed or converted, Congress meant to include, in the Chapter 13 estate, property of the types specified in general definition of “property of the estate,” including bequests, devises, or inheritances, but without the temporal restrictions on whether these types of assets were included in general bankruptcy estate. The only temporal restriction on whether these types of property were included in Chapter 13 estate was that they had to be acquired by debtor post-petition and prior to closure, conversion, or dismissal of case.
The Bankruptcy Court for the Middle District of Florida (Glenn, J.) adopted an even more expansive holding in the 2000 case of In re Nott. In Nott the debtor received an inheritance from her mother one year after the debtor’s Chapter 13 case had been confirmed. The court held that that the debtor’s receipt of an inheritance after the initial confirmation of a Chapter 13 plan may be captured for the benefit of creditors at the confirmation of a modified plan under § 1329.
Nott is a boon for creditors, because it allows holders of allowed unsecured claims to disgorge the debtor of its inheritance to provide for greater payments under the modified plan. It is unclear whether the Fourth or Ninth Circuits would extend their decisions past confirmation, but Nott offers Florida creditors to greater access to funds that would otherwise be entirely out of reach.