Chapter 7 Equity after Convert from Chapter 13

A chapter 13 plan is usually from three to five years. Debtors often are unable to complete the plan and need to convert to chapter 7.

A case just decided is helpful on one issue. Suppose a debtor at the time of filing bankruptcy has no equity in a vehicle. But after payments made during a chapter 13 Fort Lauderdale bankruptcy, the debtor may now have equity in the vehicle. Does the chapter 7 trustee have a claim on the vehicle based on the accumulated equity at the time of the conversion to chapter 7?

In re Robinson,, 2012 Bankr Lexis 1960(Bankr. M. D. FL May 3, 2012) involved a debtor who made car payments as part of the chapter 13 plan before converting to chapter 7. Judge Funk recognized that there was no binding authority and recognized a split in the case law. However, he did rely on a prior decision by Judge Paskay which involved payments outside of the Chapter 13 Plan. Perhaps more important for a South Florida Bankruptcy is that Judge Funk did rely upon a decision of Judge Mark in In re Sargente, 202 BR 1023(Bankr. S.D. FL. 1996).

The holding is that the chapter 7 trustee is not entitled to the equity increase that the debtor accumulated during the chapter 13 prior to conversion to chapter 7.

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