May 2023

An informative e-newsletter for the Real Property Law Section of the State Bar of Michigan.

Who receives the increased equity in real property when a chapter 13 case is converted to Chapter 7?

By Keith A. Schofner, Lambert Leser, and Andrew J. Gerdes, Capital Bankruptcy

Who is entitled to the increased net equity of real property due to appreciation in value during a Chapter 13 bankruptcy case when it converts to Chapter 7? Chief Bankruptcy Judge Scott W. Dales (W.D. Mich.) has ruled that the increase in value/equity in such circumstances inures to the benefit of the bankruptcy estate, not the debtors; thus, the Chapter 7 trustee could attempt to sell such property to reach that non-exempt value. See In re Adams, 641 B.R. 147 (Bankr. W.D. Mich. 2022).

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The views and opinions expressed in these articles are those of the authors, and they do not reflect in any way the positions of the State Bar of Michigan or the Real Property Law Section. These columns are meant for informational purposes only and should not be construed as legal advice. IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding tax-related penalties or (ii) promoting, marketing, or recommending to another person any transaction or matter addressed in this communication.