Whether Inheritance Received More than 180 Days Post-Petition Is Property of Estate

Posted by NCBRC - January 11, 2013

The Fourth Circuit has agreed to hear a direct appeal to address the issue of whether an inheritance received more than 180 days post-petition is property of the chapter 13 estate.  Carroll v. Logan (In re Carroll), No. 13-1024. The debtors received a $100,000.00 inheritance after the 180 day period had lapsed and the trustee sought to modify the plan to include those funds. The bankruptcy court found that the inheritance was part of the estate and granted the trustee’s motion. In re Carroll, 2012 WL 5512356 (Bankr. E.D. N.C. Nov. 14, 2012).

The case involves the interplay of section 541(a)(5)(A), which provides that property of the estate includes an inheritance received post-petition but within 180 days of the petition date, and section 1306, which provides that the property of the estate includes property specified in section 541 as well as property acquired post-petition but prior to the close of the case. The bankruptcy court found that in chapter 13, section 1306 eliminates section 541’s 180 day limit to allow inclusion in the estate of any post-petition inheritance.

Although the bankruptcy court’s decision follows the current majority view, see, e.g, In re Tinney, 2012 Bankr. LEXIS 3092 (Bankr. N.D. Ala. July 9, 2012) (gathering cases on both sides of issue); In re Zeitchic, No. 09-05821-8-JRL, 2011 WL 5909279 (Bankr. E.D.N.C. Sept. 23, 2011) (relied on by Carroll court), the issue has not been addressed by a circuit court. But see, In re Lybrook, 951 F.2d 136 (7th Cir. 1991) (addressing issue of what property remains in estate upon conversion from chapter 13 to chapter 7 and finding, without discussion, that 1306 incorporates inheritance after the 180 day period). It is by no means universally held that such property enters the estate.

Several courts have issued well-reasoned opinions finding that the 180 time limitation set forth in section 541(a)(5) is a substantive provision defining the type of property referred to in section 1306. These courts find that section 1306’s incorporation of property “specified in [section 541]” refers to property which would be part of the estate under that section and, therefore, would not include inheritances acquired after the 180 day period had passed.

For instance, in In re Key, 465 B.R. 709 (Bankr. S.D. Ga. 2012), the court reasoned that, pursuant to standard rules of statutory construction, the specificity in section 541 which defines the parameters of post-petition property that is drawn into the estate, overrides the more general provision in section 1306 which incorporates section 541. Id. at 711 (“[T]he general language of § 1306(a)(1) does not pull property expressly excluded by § 541(a)(5) into the property of the estate.”). See also, In re Egan, 458 B.R. 836 (Bankr. E.D. Pa. 2011) (trustee’s position would arguably bring in other property specifically excluded by section 541(b) and (c)(2)); In re Schlottman, 319 B.R. 23 (Bankr. M.D. Fla.2004); In re Walsh, 2011 WL 2621018 at *2 (Bankr. S.D. Ga. June 15, 2011). The Key court additionally points out that under the trustee’s interpretation, it would not have been necessary to enact section 1306(c) which brings into the chapter 13 estate property otherwise specifically excluded by the temporal limitation of section 541(a)(6).

The Fourth Circuit granted leave to appeal on January 4, 2013.




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