The BAP for the Ninth Circuit found that a pre-petition tax refund which was obtained and spent by chapter 13 debtor post-petition but prior to confirmation of chapter 13 plan, was not subject to turnover upon conversion to chapter 7. Warfield v. Salazar (In re Salazar), No. 11-1551 (B.A.P. 9th Cir. March 14, 2012), The court found that the case turned on interpretation of section 348(f)(1)(A) which provides that upon conversion from chapter 13 to chapter 7 the estate consists of property in the possession or control of debtor at the date of conversion. Noting that section 348(f)(1)(A) creates an anomaly whereby a debtor who remains in chapter 13 would have had to have included the refund in the plan, and a debtor who had filed originally in chapter 7 would have been required to turn over the refund, the court found that the plain language of that section pinpoints the date of conversion as the relevant point. Applying rules of statutory construction, the court found that this result was not absurd and that, in the absence of bad faith, the debtors therefore were not required to turn over the tax refund.
