Background

The Schellenbergs filed a Chapter 13 Bankruptcy petition on February 2, 2009. The purpose of the filing was to protect from foreclosure a horse ranch that the Schellenbergs had built that was to serve as their homestead and horse training business. The Schellenbergs had borrowed $772, 000 from First State Bank of Central Texas (“FSBCT”) on or about August 10, 2006. On the date of their bankruptcy petition, the Schellenbergs owed the full amount of the Note plus accrued interest in the amount of $802, 045.06.

At the hearings on FSBCT’s Motion for Relief from Stay, Mrs. Schellenberg testified that it was her life’s dream and ambition to operate a horse business. She further testified that the Chapter 13 filing was to halt foreclosure and to find alternative financing. The Schellenbergs were unable to find alternative financing and the Court granted FSBCT’s Motion for Relief from Stay which allowed FSBCT to conduct a foreclosure on August 4, 2009.

On or about March 5, 2009, the Schellenbergs filed their Schedules. The Schellenbergs’ homestead property was listed as exempt with a value that exceeded the debt by roughly $575,000. The Schellenbergs claimed state exemptions and, as such, the homestead property was completely exempted.

After FSBCT conducted its foreclosure, the Schellenbergs converted their case to Chapter 7 on September 10, 2009. The Schellenbergs then filed Amended Schedules on October 30, 2009. The Schellenbergs switched the basis of their exemptions to federal exemptions. Notably, the Debtors did not list their homestead property or its purported equity in their Amended Schedules because the property had been foreclosed.

Because the Schellenbergs had switched from state to federal exemptions upon conversion to Chapter 7, and also because the Schellenbergs no longer claimed a homestead exemption, the Schellenbergs were able to exempt property after conversion to Chapter 7 that they did not exempt when they filed Chapter 13. Specifically, the Schellenbergs now exempted four checking and one savings account in the aggregate amount of $3,068.55. Further, they have exempted a personal injury award with a stated recovery of $15,000.10 and some miscellaneous items in the amount of $225.

The Objection

The Chapter 7 Bankruptcy Trustee filed his Objection to Debtors’ Amended Schedule C Property Claimed or Exempt on November 25, 2009. The Chapter 7 Trustee does not dispute the Debtors’ right to file amendments to their Schedules. That said, the Trustee argues that the Schellenbergs have already removed real property from the bankruptcy estate by exempting the real property under Section 522(b)(3). In doing so, the Schellenbergs also removed the purported equity of over $568,000 in the property. The fact that the property was foreclosed does not change the property’s exempt status. Now the Schellenbergs wish to exempt even more property from the estate by using federal exemptions. The Trustee asserts that switching exemptions is prejudicial to creditors.

The Response

The Schellenbergs contend that there is no prejudice to the Chapter 7 Trustee because they claim that the Fifth Circuit focuses on whether there is prejudice to a creditor who relied on the Debtors’ exemptions before conversion. As such, because the Chapter 7 Trustee was not a party during the Chapter 13 bankruptcy, there can be no detrimental reliance by the Chapter 7 Trustee. Moreover, the Debtors contend there is no prejudice to the Chapter 13 Trustee because she cannot liquidate property.

Also, the Debtors that contend even if the Court were to analyze the matter from the perspective of a hypothetical unsecured creditor, there is still no prejudice because it was unlikely that the Debtors could have sold their homestead for the stated equity. Moreover, FSBCT did foreclose on the property, leaving no equity to anyone. The Debtors also contend that there has been no showing that any party/creditor detrimentally relied on the Debtors’ initial exemptions such that they are prejudiced by the amended exemptions.

Analysis

The Court finds the Chapter 7 Trustee is correct in his arguments. The Fifth Circuit held in In re Williamson that exemptions, for purposes of when they are determined in a case converted from Chapter 11 to Chapter 7, are determined on the petition date. The Fifth Circuit did, however, recognize that amendments under Rule 1009 are liberally construed if there was no bad faith or prejudice to creditors. Similarly, in In re Sandoval the Fifth Circuit held that a homestead exemption in a case converted from Chapter 13 to Chapter 7 is determined on the petition date.

As the Trustee points out, exemptions are determined on the date of petition, not conversion. Further, although Rule 1009(a) does allow for liberal exemptions, exemptions can only be allowed under applicable law. The Schellenbergs elected to file Chapter 13 and protect their perceived equity in their homestead. The Chapter 13 case failed. The conversion to Chapter 7 affords the Chapter 7 Trustee the ability to administer non-exempt assets. As such, the Schellenbergs ‘ cash, personal injury award, and miscellaneous personal property are subject to administration. The Schellenbergs are incorrect in their assertion that there is no prejudice – both the Chapter 13 and 7 Trustees relied upon the original claim of exemptions as did the creditors. To allow the Schellenbergs to amend their exemptions gives them the ability to exempt more property than was originally claimed and was originally exempt. The Court granted the Trustee’s Objection.

Get Help

The Woodlands Bankruptcy Attorney is here to help you get through the bankruptcy process and protect your rights to the fullest extent. Don’t risk losing property you may be able to keep. Call (832) 426-393 and get help today.

LoneStarBankruptcy.com provides the latest news and information on Chapter 7 and Chapter 13 bankruptcy in the Southern District of Texas. The Federal Bankruptcy Court for the Southern District of Texas covers many communities including: Houston, Spring, Conroe, The Woodlands, Montgomery County, and Harris County. If you need legal assistance with a personal bankruptcy matter speak with a local bankruptcy attorney today.

In re Schellenberg, 09-10272-CAG

Related posts:

1. Texas Bankruptcy Exemptions – Jewelry
2. 2010 Federal Bankruptcy Exemptions
3. Bankruptcy Exemptions: Home

Here is what must be taken care of in the first 15 days of your Chapter 7 case. This is the bare minimum, depending on your circumstances additional filings may be required.

1. Filing Fee of $245. This must be paid when your case is filed, unless you file a request for installment payments or a waiver.
2. Administrative fee of $39 and trustee surcharge of $15.
3. Voluntary Petition. Names and addresses of all creditors of the debtor. These documents must be filed WITH the petition.
4. Notice to Individual Debtor with Primarily Consumer Debts under 11 U.S.C. § 342(b). Your Woodlands Bankruptcy Attorney must give you this notice before your case is filed and it must be certified on your original petition or within 15 days.
5. Statement of Social Security Number. This must be submitted with the original petition.
6. Individual Debtor’s Statement of Compliance with Credit Counseling Requirement. Exhibit D must be filed with your petition. The certificate itself can be filed with the petition or within 15 days.
7. Statement of current monthly income. This must be filed with the petition or within 15 days.
8. Schedules of assets and liabilities. This must be filed with the petition or within 15 days.
9. Schedule of executory contracts and unexpired leases. This must be filed with the petition or within 15 days.
10. Schedules of current income and expenditures. This must be filed with the petition or within 15 days.
11. Statement of financial affairs. This must be filed with the petition or within 15 days.
12. Copies of all payment advices or other evidence of payment received by the debtor from any employer within 60 days before the filing of the petition. These must be filed with the petition or within 15 days.

Get Help

The Woodlands Bankruptcy Attorney is here to help you get through the bankruptcy process and protect your rights to the fullest extent. Don’t risk the judge dismissing your case because you missed a deadline. Get help today.

LoneStarBankruptcy.com provides the latest news and information on Chapter 7 and Chapter 13 bankruptcy in the Southern District of Texas. The Federal Bankruptcy Court for the Southern District of Texas covers many communities including: Houston, Spring, Conroe, The Woodlands, Montgomery County, and Harris County. If you need legal assistance with a personal bankruptcy matter speak with a local bankruptcy attorney today.

Related posts:

1. Your Duties in Chapter 7 Bankruptcy – Part 5

This is Part 6 of my series reviewing your obligations as a bankruptcy filer in Harris County or Montgomery County and the Southern District of Texas. In addition to the obligations we previously discussed, your obligations include:

1. You are required to appear and attend a Meeting of Creditors. The clerk of the U.S. Bankruptcy Court provides notice of this meeting. If you have not received notice of your meeting within 20 days after your case is filed, contact your attorney. The meeting can only be rescheduled as a result of an emergency or an unavoidable or unforeseen conflict. Work related conflicts must be resolved by you. Travel and/or vacations plans are not grounds for rescheduling. If you are not represented by counsel, requests for a new date and time must be in writing and received more than 15 fifteen days prior to your scheduled meeting and you must provide a statement as to the nature of the emergency or conflict. It is the Trustee’s discretion as to whether a reset date and time will be given. You or your attorney will be responsible for re-noticing all creditors of the date and time of the reset. Do not call the Clerk’s office and ask for a reset.
2. You must bring picture identification issued by a governmental authority to your Meeting of Creditors, such as a driver’s license, and your social security card. If you do not have a social security card, you must bring a pay stub, W-2, 1099 or other documents not created by you with the complete number. Your tax return is not sufficient. Failure to bring proper identification or proof of social security will cause your meeting to be reset.
3. If your meeting is reset, you and your attorney must sign and file with the Court a written statement that the reset date is the new date for the First Meeting of Creditors, and that you agree and acknowledge that all deadlines associated with the date set for the First Meeting of Creditors run from the new date.

Your Houston Bankruptcy Attorney can represent you through the process and make sure you fulfill your legal obligations in order to get the discharge you are entitled to. We will continue our review of your obligations to the Bankruptcy Court in your Chapter 7 case in our next article.

Related posts:

1. Your Duties in Chapter 7 Bankruptcy – Part 5
2. Your Duties in Chapter 7 Bankruptcy – Part 1
3. Your Duties in Chapter 7 Bankruptcy – Part 3

This is Part 5 of my series reviewing your obligations as a bankruptcy filer in Montgomery County and the Southern District of Texas. In addition to the obligations we previously discussed, your obligations include:

1. You are required to file and complete your statement as to your intention concerning secured consumer debt. The Trustee will assume that you have done so within the time provided unless you advise the Trustee in writing to the contrary, and state your plans to remedy any default.
2. Pursuant to the rules regarding electronic filing, you are required to provide the Trustee at least ten (10) days prior to your scheduled creditors meeting, with a copy of your schedules, statement of financial affairs, means test form, certificate of credit counseling, two years of tax returns, the bank statements for the two months prior to filing including the month of filing and proof of income for the 60 days prior to filing. Failure to provide this information within ten (10) days in advance of the First Meeting of Creditors will cause your meeting to be reset. Additionally, if you fail to provide these documents it could result in dismissal of your case.

Your Conroe Bankruptcy Attorney can represent you through the process and make sure you fulfill your legal obligations in order to get the discharge you are entitled to. We will continue our review of your obligations to the Bankruptcy Court in your Chapter 7 case in our next article.

Related posts:

1. Your Duties in Chapter 7 Bankruptcy – Part 6
2. Your Duties in Chapter 7 Bankruptcy – Part 2
3. Your Duties in Chapter 7 Bankruptcy – Part 3

This is Part 4 of my series reviewing your obligations as a bankruptcy filer in Montgomery County and the Southern District of Texas. In addition to the obligations we previously discussed, your obligations include:

1. You must provide written notice to the Trustee of any tax refund in excess of $2,500.00 you anticipate receiving or actually receive.
2. You are still responsible for filing your own personal income tax return. You should inform your tax advisor of the filing of your bankruptcy petition, as it affects your own personal tax return. If necessary for the administration of the bankruptcy estate, the Trustee will request copies of pre petition tax returns. If you believe that you need to amend a pre-petition tax return you must notify the Trustee in writing.

Your Conroe Bankruptcy Attorney can represent you through the process and make sure you fulfill your legal obligations in order to get the discharge you are entitled to. We will continue our review of your obligations to the Bankruptcy Court in your Chapter 7 case in our next article.

Related posts:

1. Your Duties in Chapter 7 Bankruptcy – Part 2
2. Your Duties in Chapter 7 Bankruptcy – Part 1
3. Your Duties in Chapter 7 Bankruptcy – Part 3

This is Part 3 of my series reviewing your obligations as a bankruptcy filer in Montgomery County and the Southern District of Texas. In addition to the obligations we previously discussed, your obligations include:

1. You must provide written notice to the Trustee of any leases, contracts or agreements that require you to provide services or property in the future that entitle you to compensation, services or property in the future.
2. You must turnover to the Trustee the names and addresses of each and every party to whom any transfers, conveyances of gifts or your property that you made and that were not scheduled and that were made within one (1) year prior to the date you filed bankruptcy.
3. You must provide written notice to the Trustee of all debts repaid within the year prior to filing bankruptcy. You need not advise the Trustee of debts repayments that are properly scheduled or if the total amount of the debt was less than $1,000.00.

Your Conroe Bankruptcy Attorney can represent you through the process and make sure you fulfill your legal obligations in order to get the discharge you are entitled to. We will continue our review of your obligations to the Bankruptcy Court in your Chapter 7 case in our next article.

Related posts:

1. Your Duties in Chapter 7 Bankruptcy – Part 5
2. Your Duties in Chapter 7 Bankruptcy – Part 1
3. Your Duties in Chapter 7 Bankruptcy – Part 2

This is Part 2 of my series reviewing your obligations as a bankruptcy filer in The Woodlands and the Southern District of Texas. Your obligations include:

1. You must provide a written statement to the Trustee describing the status of any domestic support obligations you owe, i.e. the amount you owe; when it is owed; are you current or delinquent; if delinquent for how long and how much is owed; and the name and address to whom you pay a domestic support obligations.
2. You must provide written notice to the Trustee of any monies you may receive as a beneficiary of a life insurance policy or as a result of a death benefit plan that you acquire or become entitled to prior to the filing of bankruptcy or within six (6) months after the date you filed your bankruptcy petition.
3. You must turn over to the Trustee any money that you receive as a result of rental properties that are not claimed as exempt.

Your Woodlands Bankruptcy Attorney can represent you through the process and make sure you fulfill your legal obligations in order to get the discharge you are entitled to. We will continue our review of your obligations to the Bankruptcy Court in your Chapter 7 case in our next article.

Related posts:

1. Your Duties in Chapter 7 Bankruptcy – Part 1
2. Your Duties in Chapter 7 Bankruptcy – Part 4
3. Your Duties in Chapter 7 Bankruptcy – Part 3

Today we will review some of your duties to the Court when you file for Chapter 7 Bankruptcy. Your obligations include:

1. You must provide written notice to the Trustee if you remember or become aware of any property (of any kind or value) that you owned or were entitled to at the date you filed your bankruptcy, that you forgot to list or that you did not become aware of until after you filed bankruptcy.
2. You must provide written notice to the Trustee of any inheritance or monies that you receive or become entitled to as a result of a death that occurred either before you filed bankruptcy or within six (6) months after your bankruptcy filing.
3. You must provide written notice to the Trustee of any money or property you may receive as a result of a final divorce decree (excluding child support) that occurred either before you filed bankruptcy or within six (6) months after the date you filed your bankruptcy petition. (A copy of the Divorce Decree and the Property Settlement Agreement or Agreement Incident to Divorce should be sent with the notice.)

Your Woodlands Bankruptcy Attorney can represent you through the process and make sure you fulfill your legal obligations in order to get the discharge you are entitled to. We will continue our review of your obligations to the Bankruptcy Court in your Chapter 7 case in our next article.

Related posts:

1. Your Duties in Chapter 7 Bankruptcy – Part 3
2. Your Duties in Chapter 7 Bankruptcy – Part 2
3. Your Duties in Chapter 7 Bankruptcy – Part 4