Published on Jan. 9, 2024

Updated on Jan. 31, 2024

Courts have long struggled to determine which party receives post-petition equity increases in bankruptcy proceedings. The solution to the problem is showcased in a recent Missouri court opinion.

By: Michael Rotellini^*

In re Goetz (Bankr. W.D. Mo. 2022)

I.              Introduction

            “There is no place like home.”^[1]  This is the iconic line Dorothy says at the end of the film The Wizard of Oz.  A tornado rips through Kansas to start the film, sending Dorothy and her house falling into the magical land of Oz and on the Wicked Witch of the East.^[2]  Just like the Wizard of Oz, this Note both starts and ends with the home.  Imagine a Missouri couple who own a home early in 2020.  The tornado of financial distress has hit them.  They now have to file a Chapter 13 bankruptcy, promising a way out of debt in exchange for their future income for a time.  These Missouri homeowners do not have much, but they act in good faith and make monthly payments to their creditors.  Missouri homeowners struggling to make monthly payments to creditors must convert their case to Chapter 7 to stay in bankruptcy.  The only good financial news the homeowners have is that their house has appreciated in value considerably due to a low supply of homes available for sale and burgeoning inflation.  This appreciation in equity happened after they filed for Chapter 13 bankruptcy but before the conversion to Chapter 7.  The Chapter 7 trustee now wants to sell their house, but the debtor asserts the post-petition equity increase in the value of their home rightfully belongs to them—Lions, tigers, and bears, oh my!^[3]  Will the debtor get to keep the house and the equity that accrued, or will they be hit with the weight of the Bankruptcy Code crushing them like the Wicked Witch of the East?

            The case In re Goetz illustrates the above hypothetical.  The central issue in Goetz is whether a debtor or the Chapter 7 estate receives the benefit of non-exempt equity that arises after the date the debtor commences a Chapter 13 case but before the date the court converts the case to Chapter 7.^[4]  This issue has challenged bankruptcy courts throughout the United States.^[5]  This Note will analyze two approaches taken by courts to determine which approach produces the most equitable outcome between the debtor and creditors permitted under the Bankruptcy Code.

            Part II focuses on the procedural posture of In re Goetz and the court’s holding that the post-petition increase in equity in her residence belonged to her bankruptcy estate.^[6]  Part III discusses applicable provisions of the Bankruptcy Code and caselaw determining who benefits in increases of non-exempt equity in converted cases.  Part IV explains the court’s decision in In re Goetz.  Finally,Part V analyzes the ramifications of the court’s decision on Missouri bankruptcy courts and other courts throughout the Eighth Circuit.

II.              Facts and Holding

            Machele Goetz (“Goetz”) filed a Chapter 13 bankruptcy petition in August of 2020.^[7]  On that date, she owned a residence worth $130,000 which had a lien on it held by Freedom Mortgage worth $107,460.54.^[8]  Goetz claimed a $15,000 homestead exemption, which is the maximum homestead exemption available under Missouri law.^[9]  As of that date, the Chapter 13 trustee would have received $7,539.46 before marketing and selling costs.^[10]  The parties agreed that the bankruptcy estate would have received nothing if the trustee had liquidated the residence on the Chapter 13 petition date.^[11]  More than a year after filing, Goetz requested to convert her Chapter 13 case to Chapter 7.^[12]  The court granted Goetz’s request in April 2022.^[13]  Upon conversion, the Chapter 7 trustee indicated that he was considering selling Goetz’ residence for the benefit of the bankruptcy estate.^[14]

            Between August 2020 and April 2022, Goetz’s residence increased in value by $75,000, and she reduced Freedom Mortgage’s claim by $960.54 by continuing to make monthly mortgage payments.^[15]  The parties agreed that if the Chapter 7 trustee sold the home on the date the case was converted, the bankruptcy estate would have received more than $62,000 in proceeds.^[16]  Due to the net proceeds that could be achieved, the Chapter 7 trustee wanted to sell the home for the benefit of the general unsecured creditors.^[17]

            Goetz asked the court to compel the trustee to abandon the bankruptcy estate’s interest in her residence, arguing the residence is of “inconsequential value and benefit to the estate.”^[18]  Goetz argued that the court must exclude from its consideration the increase in non-exempt equity that arose between the date Goetz filed her Chapter 13 petition and the date the court converted her case to Chapter 7.^[19]  The Chapter 7 trustee wanted to sell the home and asked the court to deny Goetz’ motion to compel abandonment, arguing the estate in the converted case included Goetz’s entire interest in the residence under 11 U.S.C. § 348(f) and the post-petition increase in non-exempt equity made the residence value to the estate more than inconsequential under 11 U.S.C. § 554.^[20]

            The court denied Goetz’ motion to compel abandonment and held that the post-petition increase in equity in her residence was part of the bankruptcy estate.^[21]

III.              Legal Background

            The Goetz court weighed the competing interests of debtors and creditors to come to an equitable decision under the Bankruptcy Code.  The court addressed the relevant statutory provisions applicable to its decision and considered past precedent of its own circuit and other circuits to make a conclusion. The applicable Bankruptcy Code provisions include what is property of the estate, the differences in Chapter choice between Chapter 13 and 7, motions concerning conversion and abandonment, and the relevant case law interpreting these Bankruptcy Code provisions. These Bankruptcy Code provisions lay the foundation for Goetz’ conversion and attempted abandonment motion as well as a baseline for the Chapter 7 trustee’s argument.  

A.    Property of the Estate

            Individual consumers file for bankruptcy by filing a petition with a bankruptcy court.^[22]  Most debtors typically file under Chapter 7 or Chapter 13.^[23]  When the bankruptcy petition is filed, a trust forms.^[24]  This trust becomes the bankruptcy estate.^[25]  The estate consists of certain assets of the debtor, depending on what type of bankruptcy the debtor files.^[26]  Section 541 of the Bankruptcy Code details what makes up property of an estate.^[27]  Section 541(a)(1) broadly defines “property of the estate” to include “all legal or equitable interests of the debtor in property as of the commencement of the case.”^[28].  Section 541(a)(6) states that “[p]roceeds, product, offspring, rents, or profits of or from property of the estate, except such as are earnings from services performed by an individual debtor after the commencement of the case.”^[29]  The definition of “proceeds” is not included the Bankruptcy Code.^[30]  However, both the House and Senate Committee reports on § 541 state that “proceeds,” as used in § 541(a)(6), was not a confining term, but rather should be construed as a broad term encompassing all proceeds of estate property.^[31]  This would be in line with the intent of § 541(a) that looks to broadly include all interests of the debtor as property of the estate.^[32]  However, there are exemptions to the bankruptcy estate.

            The law in every state makes at least some property exempt from bankruptcy so no debtor will face absolute destitution.^[33]  One prominent example is the homestead exemption,^[34] which allows the debtor to receive a certain amount of value when the home is sold.^[35]

B.    Differences Between Chapter 7 and 13

            The bankruptcy estate consists of different assets depending on the Chapter the debtor selects. A Chapter 13 bankruptcy focuses on using a debtor’s future earnings, rather than assets already accumulated to pay creditors.^[36]  Chapter 13 debtors are able to keep all assets.^[37]  If a Chapter 13 debtor is having difficulty making plan payments, the debtor may be able to convert their case to another Chapter, most commonly Chapter 7.^[38]

            In Chapter 7, the debtor effectively freezes their assets and debts when they file for bankruptcy.  The court will appoint a trustee, typically a local lawyer picked from a “panel” of certified practitioners.^[39]  The trustee administers the debtor’s estate by gathering all the estate assets and sells them to benefit the creditors, and specifically the general unsecured creditors.^[40]  There are instances where a debtor can ask the court for the trustee to abandon what may normally be included in the bankruptcy estate.^[41]

C.    Abandonment

            Section 554 of the Bankruptcy Code governs abandonment.^[42]  Section 554(b) empowers courts to “order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.”^[43] At a minimum, property has more than “inconsequential value and benefit to the estate” under § 554(b) if profit from the disposition or use of the property would generate a meaningful distribution to unsecured creditors.^[44]  The party requesting abandonment has the burden of proof to show that the property is of inconsequential value and benefit to the estate.^[45]  Abandoned property is no longer a part of the bankruptcy estate.^[46]

D.    Conversion

            Section 1307(a) of the Bankruptcy Code governs conversion.^[47]  Section 1307(a) states that “[t]he debtor may convert a case under this Chapter to a case under Chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable.”^[48]  Conversion allows a person to switch their bankruptcy from their current Chapter to a Chapter 7 bankruptcy.  Section 348 of the Bankruptcy Code governs the effect of conversion of a case from one Chapter to another Chapter.^[49]

            Section 348(f)(1)(A) provides that when a case under Chapter 13 converts to a case under another Chapter, any property as of the petition date would be part of the converted Chapter’s bankruptcy estate, but property that accrued after the petition date would belong to the debtor.  A  new valuation would have to take place upon conversion.  A House report on this issue states that “this amendment would clarify the [Bankruptcy] Code to resolve a split in the case law about what property is in the bankruptcy estate when a debtor converts from Chapter 13 to Chapter 7.”^[50]  Generally, courts disagree about whether post-petition equity increases constitute “new” property that become property of a converted Chapter 7 estate under § 348(f)(1)-(2).^[51]

E.    Case Law Dealing With Who Gets the Post-Petition Appreciation of an Asset

            A slight majority of courts hold that post-petition increases in non-exempt equity do not become property of the estate in a converted Chapter 7 case.^[52]  In Barrera, the Bankruptcy Appellate Panel (“B.A.P.”) of the Tenth Circuit^[53] held that (1) the relevant language in § 348(f)(1)(A) is ambiguous, and (2) the legislative history of § 348(f)(1) suggests Congress intended to exclude post-petition increase in equity from the converted Chapter 7 estate.^[54]  The B.A.P of the Tenth Circuit concluded that upon conversion, property still in control of the debtor revests in the Chapter 7 bankruptcy estate, even if it had previously been vested in the debtor.^[55]

            In In re Cofer, the court stated that for § 348(f)(1)(A) to be relevant, the post-petition equity appreciation would have had to be property of the estate on the date of conversion rather than the date of petition.^[56]  The court concluded that, upon conversion, property still in control of the debtor revests in the Chapter 7 bankruptcy estate, even if it had previously been vested in the debtor.^[57]  However, according to both Barrera and Cofer, what revests is the property of the estate “as it existed on the petition date, with all its attributes, including the amount of equity that existed on that date.”^[58]  Consequently, any post-petition appreciation belongs to the debtor.^[59]

            Some courts hold that § 348(f)(1)(A) gives the converted estate an interest in each specific item of property the debtor owned on the petition date that has been retained on the conversion date, such that each item of property enters the converted estate with the characteristics it has on the conversation date, including any post-petition increase in non-exempt equity.^[60]  In re Goins involved a case converted from Chapter 13 to Chapter 7 where the trustee sought to sell mortgaged property and the debtor moved to compel abandonment.^[61]  The Goins court relied on § 541(a)(6), not § 348(f)(1)(A), holding that the debtor’s equity or appreciation in the value of property is inseparable from the property itself.  Since the real estate was property of the estate at the time the petition was filed under Chapter 13, the court stated, its “proceeds” under § 541(a)(6) include the increase in value.^[62]

            While Goins focused on § 541(a) broad interpretation, other courts have concluded post-petition, pre-conversation appreciation in value belongs to the estate on different grounds.  In re Castleman focused on a case converting from Chapter 13 to Chapter 7 where the Chapter 7 trustee filed a motion to determine that property of the Chapter 7 estate included the current market value of the debtors’ real property and authorization to market debtors’ residence.^[63]  The Castleman court held that the real property was property of the bankruptcy estate at the petition date, the debtors possessed real property at the date of conversion, and pursuant to § 348(f)(1), the real property is property of the Chapter 7 estate.^[64]  Further, the court stated that the failure of the provision to address risk of conversion from Chapter 13 to Chapter 7 does not create ambiguity or put the provision out of harmony with the overall legislative intent.^[65]

IV.              Instant Decision

            In re Goetz held that, under the plain language of § 348(f)(1)(A), if the debtor owns an item of property on the Chapter 13 petition date and retains it on the date of conversion to Chapter 7, the property becomes part of the converted Chapter 7 estate and may be subject to administration by the Chapter 7 trustee.^[66]  The court reasoned that § 348(f)(1)(A) includes in the converted Chapter 7 estate all “property of the estate” the debtor owned on the petition date and retains at conversion.^[67]  Additionally, § 541(a)(1) broadly defines “property of the estate” to include “all legal or equitable interests of the debtor in property as of the commencement of the case.”^[68]

            The court analyzed the term “equity” as “the difference between the value of the property and all encumbrances on it.”^[69] The court held that equity cannot include after-acquired property because the plain language of §§ 348(f)(1)(A) and 541(a)(1) would include equity as part of the estate because it cannot be separated from the underlying real estate.^[70]

            The court concluded that its findings in this case were also consistent with § 348(f)(1)(B).^[71]  Section 348(f)(1)(B) invalidates valuations in a Chapter 13 case inapplicable when the case converts to Chapter 7.^[72]  The court explained, citing its prior decision In re Jackson, “the underlying policy is that the parties should be in the same position they would be in had the Debtor simply filed Chapter 7 on the date of conversion.”^[73]

            The court respectfully disagreed with the courts that have determined the legislative history of § 348(f)(1) compels a different result.^[74]  The court noted that where the plain language of the statutory text is clear, the court’s inquiry must begin and end with the statutory text.^[75]  The text of the Bankruptcy Code in analyzing § 348(f)(1)(A) and § 541(a)(1) make post-petition equity increases property of the converted Chapter 7 estate.^[76]

V.              Comment

            The Western District of Missouri Bankruptcy Court correctly decided this case.  The court’s holding in Goetz is in line with the Bankruptcy Code and walks away from the slight majority of courts who find Barrera and Cofer persuasive.^[77]  The minority rule that post-petition, pre-conversion equity appreciation of property inures to the benefit of the Chapter 7 estate upon conversion follows closer to the Bankruptcy Code for four reasons.  First, post-petition equity is inseparable from the underlying real estate and under the Bankruptcy Code, the Chapter 7 estate is entitled to that value.^[78]  Second, this rule follows closer to the legislative history and intent of Congress, rather than the majority rule.^[79]  Third, the holdings in Barrera and Cofer that helped establish the current majority rule misapplied the legislative history, confronted a different problem, or relied on wrong case law.^[80]  Last, the practical application of the court’s decision helps keep the goals of bankruptcy law in check.

A.    Post-Petition Equity is Inseparable From Real Estate

            “Equity” is “the difference between the value of the property and all encumbrances on it.”^[81]  Equity is not a separate item of property; it exists only as a characteristic of an underlying asset.^[82]  Equity is thus inseparable from real estate because equity is a valuation of the real estate.^[83]  Since equity is a valuation of real estate, § 348(f)(1)(B) would appear to forbid its valuation as of the petition date in Chapter 7.^[84]  Section 541(a) broadly defines what is property of the estate which would capture the debtor’s entire ownership interest in each asset that exists on the petition date without fixing the estate’s interest to the precise characteristics the asset has on that date.^[85]  Congress deliberately made the section broad as to sweep most items into the bankruptcy estate.^[86]  Section 348(f)(1)(A), together with § 541(a), would lead to the conclusion that post-petition equity should thus go to the benefit of Chapter 7 estate.^[87]  This follows the general rule that post-petition appreciation of property should inure to the benefit of the bankruptcy estate.  Courts have held that § 541(a)(6) allocates post-petition appreciation to the estate because the post-petition appreciation of the property is not separate, after-acquired property to which an inquiry to § 348(f)(1)(A) is needed.^[88]  

            The majority rule ignores § 348(f)(1)(B)’s barring of Chapter 13 valuation from applying to a case converted to Chapter 7.^[89]  Further, this approach separates the equity of the estate from equity of the debtor.^[90]  This would create a different classification from the same item.^[91]

B.    The Majority Misapplies Section 348(f)’s Legislative History of § 348(f)

            The legislative history would seem to support a result that recognizes a paydown exception, while keeping intact post-petition interest in property, inuring to the benefit of the Chapter 7 trustee.^[92]  Both Barrera and In re Cofer interpreted the relevant legislative history as support for a conclusion that “property” means “property as it existed on the petition date, with all its attributes, including the amount of equity that existed on that date.”^[93]  However, this misinterprets what Congress’s intent was with  § 348(f)(1)(A).  Congress intended to eliminate certain disincentives to filing Chapter 13 regarding the risk of losing assets acquired between the date of the petition to the Chapter 7 estate if the Chapter 13 case are eventually converted.^[94]  

            Confusion does abound by the example used in the House Report.^[95]  The House Report illustrates Congress’s wish for a paydown exception; where the equity created by paying down a mortgage on real property would inure to the benefit of the debtor in the case of conversion.^[96]  The court in In re Cofer used that example to justify a standard rule that post-petition appreciation in equity always benefits the debtor.^[97]  Even the court in In re Goins noted the House Report recognized a paydown exception, but kept in harmony with the plain meaning of § 348(f)(1)(A) that equity generally inures to the benefit of the Chapter 7 trustee.^[98]  Even though a paydown exception may be part of the legislative history of § 348(f)(1)(A), a general rule excluding post-petition equity on non-exempt assets is not found in § 348(f)’s legislative history.^[99]

C.    Problems with Barrera and In re Cofer

            Barrera does not stand for the proposition that post-petition, pre-conversion appreciation inures to the benefit of the debtor.^[100]  Barrera concerns who should receive the proceeds of a home sale after Chapter 13 confirmation but before Chapter 7 conversion.^[101]  Barrera determined that § 541 distinguishes between the property itself and the proceeds of the property.^[102]  The court in Barrera held that there were two kinds of assets which have separate legal identities.^[103]  Thus, when the debtors sold their home, they came into possession of an asset that was not part of the estate at the time of the case filing; the proceeds from the sale.^[104]  The court in Barrera does not answer whether post-petition, pre-conversion appreciation belongs to the debtor or the bankruptcy estate.^[105] Thus Cofer’s reliance on Barerraseems dubious at best.^[106]  Further, the court in Barrera found no distinction between equity increases due to the debtor’s paydown of liens or those attributable to the market saying “the legislative history points toward is Congress’ intent to leave a debtor who attempts a repayment plan no worse off than he would have been had he filed a Chapter 7 case.”^[107]  However, taking into account the Congressional House Report on § 348(f)(1)(A), it seems to apply a paydown exception and not a general rule inuring post-petition appreciation to the debtor in the case of conversion.^[108]

            Finally, Barrera noted public policy concerns that its holding would result in a windfall to debtors.^[109]  The Barrera court reasoned that a Chapter 7 debtor would seek abandonment of the property if the debtor believes the case will remain open for a significant period to avoid the possibility that the trustee can reap the benefits of an increase in equity.^[110]  The court also reasoned that where the case will be finished quickly, the trustee is unlikely to benefit from significant increase in equity.^[111]  The court argued that abandonment could only occur if the asset was of inconsequential value to the estate, thus obviating the need to worry about the debtor hiding equity from the trustee.^[112]  If there was some reliable information that the property would soon become much more valuable than an abandonment motion from the debtor would likely fail.^[113]  Additionally, Chapter 7 bankruptcy is a quicker process than Chapter 13 and is aimed at providing a better return for the general unsecured creditors.

            In re Cofer held that the reasoning of Barrera was more persuasive than that of Goins because it better reflects the legislative intent of § 348.^[114]  Once again the court relied on Barrera, which did not answer the question that presents in In re Cofer.^[115]  The court in Cofer, unfortunately, follows the same flaws as in Barrera by adopting the court’s conclusions.

D.    Practical Application of Goetz

            The Bankruptcy Court for the Western District of Missouri in Goetz follows the Ninth Circuit, Fourth Circuit, and other jurisdictions in adopting the rule.^[116]  Allowing for post-petition equity appreciation in a conversion case to benefit the Chapter 7 estate follows 348(f)(1)(A) and the broad rationale embodied in § 541(a).^[117]  This holding respects the balance brought by the bankruptcy law.  The law of creditors and debtors aims to give a fresh start to the “honest but unfortunate” debtors,^[118] getting the best collective result for creditors,^[119] and preserving the bankruptcy estate’s value.^[120]  Here, exemptions already provide the debtor with the essentials to avoid being left destitute, while also balancing creditors’ right to repayment.^[121]  If post-petition equity appreciation were to benefit the debtor, this would distort the purpose of exemptions and the rationale for the Chapter 7 bankruptcy to provide for the best return for general unsecured creditors.^[122]  Likewise, if property values were to drop, the debtor would not need to reimburse the Chapter 7 estate for the difference in equity.^[123]  This would present a windfall for the debtor in both situations where creditors would see a loss in both.  Adhering to the minority rule will provide more parity to creditors while protecting the debtor if equity changes.

            Overall, the minority rule provides a better framework regarding bankruptcy law.  Post-petition equity is inseparable from the underlying real estate.  Additionally, cases adhering to the majority rule misunderstand the legislative history of § 348(f) and thus come to a different conclusion on what Congress’s intent was in drafting § 348(f)(1)(A).^[124]

VI.              Conclusion

            The Goetz court was correct in holding that abandonment of the debtor’s residence was not appropriate because the equity was part of the estate and would have yielded more than an inconsequential dividend to general unsecured creditors.^[125] The court’s decision brings it in line with a slight minority of courts holding that post-petition, pre-conversion equity appreciation in property will inure to the benefit of the Chapter 7 estate. While the circuit split may still rage on until the Supreme Court aligns the federal judiciary behind one approach, the court’s analysis today will be persuasive to courts who will still look for an answer.  For the homeowner in bankruptcy, they should be aware of the risk that a Chapter 7 trustee may try and sell their home in Missouri if they need to convert their case to Chapter 7 and their home’s value has increased significantly post-petition. Otherwise, they will soon find they are not in Kansas anymore.^[126]

_____________________________________

^* B.A., University of Wyoming, 2017; J.D. Candidate, University of Missouri School of Law, 2024; Associate Member, Missouri Law Review, 2022­­–2023. I am grateful to Professor Garrett Pratt, for his insight, guidance, and support during the writing of this Note. Additionally, I want to thank the Missouri Law Review for their time and effort in the publishing process of this Note.

^[1] The Wizard of Oz (1939) Judy Garland as Dorothy Gale, IMDb, https://www.imdb.com/title/tt0032138/characters/nm0000023 (last visited Apr. 16, 2023).

^[2] The Wizard of Oz Plot, IMDb, https://m.imdb.com/title/tt0032138/plotsummary/ (last visited Apr. 16, 2023).

^[3] The Wizard of Oz (1939) Judy Garland as Dorothy Gale, IMDb, https://www.imdb.com/title/tt0032138/characters/nm0000023 (last visited Apr. 16, 2023).

^[4] In re Goetz, 647 B.R. 412, 414 (Bankr. W.D. Mo. 2022).

^[5] Id. at 415 (discussing how the slight majority of courts hold post-petition increases in non-exempt equity do not become property of the estate in a converted Chapter 7 case; while the minority hold that § 348(f)(1)(A) gives the converted estate an interest in each specific item of property the debtor owned on the petition date and retained on the conversation date, treating each item with the characteristics it had on the conversion date).

^[6] Id. at 418.

^[7] Id.  at 414.

^[8] Id.

^[9] Id.

^[10] The calculation reflects $130,000 (value of the residence) – $15,000 (homestead exemption claimed) – $107,460.54 (what is owed to the priority creditor) = $7,539.46 left for the Chapter 13 trustee.

^[11] In re Goetz, 647 B.R. at 414.

^[12] Id.

^[13] Id.

^[14] Id.

^[15] Id. at 415.

^[16] Id.

^[17] Id. at 414.

^[18] Id.

^[19] Id.

^[20] Id.

^[21] Id. at 418.

^[22] Elizabeth Warren, Jay Lawrence Westbrook, Katherine Porter & John A.E. Pottow, The Law of Debtors and Creditors: Text, Cases, and Problems 51 (8th ed. 2021).

^[23] Bankruptcy Filing Trends in the United States, American Bankruptcy Institute, https://abi-org.s3.amazonaws.com/Newsroom/State_Filing_Trends/2023/Filing_Trends_Missouri.pdf (Feb. 2023).

^[24] See generally 11 U.S.C. § 541(a).

^[25] See generally id.

^[26] See generally id. § 541.

^[27] Id.

^[28] Id. § 541(a)(1).

^[29] Id. § 541(a)(6).

^[30] 5 Collier on Bankruptcy P 541.15 (16th ed. 2023).

^[31] Id.

^[32] Id. at 541.01.

^[33] Warren et al., supra note 22, at 73.

^[34] See generally 11 U.S.C. § 522(d)(1).

^[35] See generally id.

^[36] Warren et al., supra note 22, at 197.

^[37] Id.

^[38] See generally 11 U.S.C. § 1307.

^[39] See generally id. § 701.

^[40] See generally id. § 704.

^[41] This situation occurs when property that would normally be a part of the bankruptcy estate would be of inconsequential value and the administration of it would be a burden to the bankruptcy estate.

^[42] In re Goetz, 647 B.R. 412, 414 (Bankr. W.D. Mo. 2022).

^[43] 11 U.S.C. § 554(b).

^[44] In re Thornton, 269 B.R. 682, 685 (Bankr. W.D. Mo. 2001).

^[45] 5 Collier on Bankruptcy P 554.02 (16th ed. 2023).

^[46] Id.

^[47] 11 U.S.C. § 1307(a).

^[48] Id.

^[49] Id. § 348.

^[50] H.R. Rep. No. 103–835 at 57 (1994), as reprinted in 1994 U.S.C.C.A.N. 3340, 3366.

^[51] In re Goetz, 647 B.R. 412, 418 (Bankr. W.D. Mo. 2022). Compare In re Barrera, BAP No. 30-003, 2020 WL 5869458, at *3-*5 (B.A.P. 10th Cir. 2020) (discussing disagreement about whether post-petition appreciation is a separate interest in property), aff’d on other grounds, 22 F.4th 1217 (10th Cir. 2022), with In re Goins, 539 B.R. 510, 516 (Bankr. E.D. Va. 2015) (“The equity is inseparable from the real estate, which was always property of the estate under § 541(a).”).

^[52] See, e.g., In re Cofer, 625 B.R. 194, 199­—202 (Bankr. D. Idaho 2021). See also, In re Barrera, BAP No. 30-003, 2020 WL 5869458, at *3-*5 (B.A.P. 10th 2020) aff’d on other grounds, 22 F.4th 1217 (10th Cir. 2022); In re Hodges 518 B.R. 445 (Bankr. E.D. Tenn. 2014).

^[53] A B.A.P. is a group of district bankruptcy judges comprised from the circuit who are appointed by the judicial council to hear and determine appeals from certain bankruptcy cases under the supervision of the United States court of appeals.  See 28 U.S.C. § 158(b).

^[54] See, e.g., In re Cofer, 625 B.R. 194, 199­—202 (Bankr. D. Idaho 2021).

^[55] Id. at 197.

^[56] Id.

^[57] Id. at 198.

^[58] Id.

^[59] Id. at 201 (citing In re Barrera, 620 B.R. 645 (Bankr. D. Colo. 2020), aff’d 2020 WL 5869458 (B.A.P. 10th Cir. 2020), aff’d 22 F.4th 1217 (10th Cir. 2022)).

^[60] See, e.g., In re Castleman, 631 B.R. 914, 921 (Bankr. W.D. Wash. 2021); In re Goins, 539 B.R. 510; In re Potter, 228 B.R. 422; In re Larzelere, 633 B.R. 677, 683 (Bankr. D.N.J. 2021); In re Hayes, slip op at 11.

^[61] In re Goins, 539 B.R. 510.

^[62] Id. at 516.

^[63] See generally id.

^[64] Id. at 920.

^[65] Id. at 921.

^[66] In re Goetz, 647 B.R. 412, 416 (Bankr. W.D. Mo. 2022) (quoting Harris v. Viegelahn, 575 U.S. 510, 517 (2015)).

^[67] 11 U.S.C. § 348(f)(1)(A).

^[68] Id. § 541(a)(1).

^[69] In re Goetz, 647 B.R. at 416 (quoting the definition of Equity from Black’s Law Dictionary (11th ed. 2019)).

^[70] Id.

^[71] Id. at 417.

^[72] 11 U.S.C. § 348(f)(1)(B).

^[73] In re Goetz, 647 B.R. at 417 (citing In re Jackson, No. 16-42695-DRD7, 2020 WL 536018, at *3 (Bankr. W.D. Mo. 2020)).

^[74] Id. at 417 (Bankr. W.D. Mo. 2022). But see, e.g., In re Cofer, 625 B.R. 194, 199—202 (Bankr. D. Idaho 2021).

^[75] In re Goetz, 647 B.R. at 417. See, Connecticut Nat. Bank v. Germain, 503 U.S. 249, 254 (1992).

^[76] In re Goetz, 647 B.R. at 418 (Bankr. W.D. Mo. 2022).

^[77] Id.

^[78] Id.

^[79] In re Castleman, 631 B.R. 914, 921 (Bankr. W.D. Wash. 2021), aff’d, 2022 WL 2392058 (W.D. Wash. 2022).

^[80] In re Cofer, 625 B.R. 194, 201 (Bankr. D. Idaho 2021). See also In re Barrera, 620 B.R. 645 (Bankr. D. Colo. 2020), aff’d 2020 WL 5869458 (B.A.P. 10th Cir. 2020), aff’d 22 F.4th 1217 (10th Cir. 2022).

^[81] Equity, Black’s Law Dictionary (11th ed. 2019).

^[82] In re Goetz, 647 B.R. at 418. See, In re Goins, 539 B.R. 510, 516 (Bankr. E.D. Va. 2015) (“equity is inseparable from the real estate”).

^[83] In re Goins, 539 B.R. 510, 516 (Bankr. E.D. Va. 2015).

^[84] 11 U.S.C. § 348(f)(1)(B).

^[85] In re Goetz, 647 B.R. at 416. See Potter v. Drewes (In re Potter), 228 B.R. 422, 424 (B.A.P. 8th Cir. 1999).

^[86] 5 Collier on Bankruptcy P 541.01 (16th ed. 2023).

^[87] In re Goetz, 647 B.R. at 416.

^[88] See generally In re Goins, 539 B.R. 516. See also In re Reed, 940 F.2d 1317, 1323 (9th Cir.1991) (“we interpret this language to mean that appreciation inures to the bankruptcy estate, not the debtor.”), In re Shipman, 344 B.R. 493, 495 (Bankr. N.D. W.Va. 2006) (“when a Chapter 7 trustee sells property of the estate, the trustee is entitled to any post-petition appreciation in value of the property.”).

^[89] 11 U.S.C. § 348(f)(1)(B).

^[90] H.R. Rep. No. 103–835 at 57 (1994), as reprinted in 1994 U.S.C.C.A.N. 3340, 3366.

^[91] Id.

^[92] In re Castleman, 631 B.R. 914, 919 (Bankr. W.D. Wash. 2021).

^[93] In re Cofer, 625 B.R. 194, 201 (Bankr. D. Idaho 2021).

^[94] In re Castleman, 631 B.R. at 919.

^[95] Id. See, H.R. Rep. No. 103–835 at 57 (1994), as reprinted in 1994 U.S.C.C.A.N. 3340, 3366.

^[96] Morgan Decker & Matthew Barr, Addressing Post-Petition Increases in Equity in a Case Converted from Chapter 13 to Chapter 7: Two Schools of Thought,  2022 Ann. Surv. of Bankr.Law 12 (2022).

^[97] In re Cofer, 625 B.R. at 201.

^[98] In re Goins, 539 B.R. 510, 516 (Bankr. E.D. Va. 2015).

^[99] Id.

^[100] In re Cofer, 625 B.R. at 201 (citing In re Barrera, 620 B.R. 645 (Bankr. D. Colo. 2020), aff’d 2020 WL 5869458 (B.A.P. 10th Cir. 2020), aff’d 22 F.4th 1217, 71 Bankr. Ct. Dec. (CRR) 49 (10th Cir. 2022)).

^[101] Decker & Barr, supra note 96.

^[102] Id.

^[103] Id.

^[104] Id.

^[105] Id.

^[106] See generally In re Cofer, 625 B.R. 194, 201 (Bankr. D. Idaho 2021).

^[107] In re Barrera, 620 B.R. 645, 653 (Bankr. D. Colo. 2020).

^[108] H.R. Rep. No. 103–835 at 57 (1994), as reprinted in 1994 U.S.C.C.A.N. 3340, 3366.

^[109] In re Barrera, 620 B.R. at 653–54.

^[110] Id.

^[111] Id.

^[112] In re Thornton, 269 B.R. 682, 685 (Bankr. W.D. Mo. 2001).

^[113] Id.

^[114] In re Cofer, 625 B.R. 194, 202 (Bankr. D. Idaho 2021).

^[115] Decker & Barr, supra note 96.

^[116] See generally In re Goetz, 647 B.R. 412 (Bankr. W.D. Mo. 2022); In re Castleman, 631 B.R. 914 (Bankr. W.D. Wash. 2021); In re Goins, 539 B.R. 510 (Bankr. E.D. Va. 2015).

^[117] 5 Collier on Bankruptcy P 541.01 (16th ed. 2023).

^[118] Warren et al., supra note 22, at 6.

^[119] Id. at 6.

^[120] Id.

^[121] Id.at 73.

^[122] Id. at 52.

^[123] 3 Collier on Bankruptcy P 348.07 (16th ed. 2023). See also In re Lang, 437 B.R. 70 (Bankr. W.D.N.Y. 2010).

^[124] In re Cofer, 625 B.R. 194, 201 (Bankr. D. Idaho 2021).

^[125] In re Goetz, 647 B.R. 412, 418 (Bankr. W.D. Mo. 2022).

^[126] Kansas o554ers an unlimited homestead exemption, so cases exploring who gets the benefit of post-petition pre-conversion equity in the debtor’s home only apply in states with a partial homestead exemption or that only can avail themselves of the federal exemptions under § 522.