Summary:
The Chapter 7 Trustee discovered that the Female Debtor was the 50% beneficiary of her late father's springing trust, with her share being worth approximately $100,000, that had not been listed in the petition. The Trustee also cam to believe, based on a valuation by a realtor, that real property valued at $10,000 by the Debtors was actually worth as much as $44,900. After discovery and belated disclosure of these, the Debtors sought to convert their case to Chapter 13, with the Trustee objecting. At the hearing on the conversion, the Male Debtor testified that he had based the value of the real property on the opinion of another realtor. The Female Debtor explained her failure to disclose the trust, as she was unaware of any beneficial interest as it had been established by her father as he was dying of cancer, with the understanding that it was to be used to provide for her alcoholic mother.
Despite recognizing the seriousness of the omissions by the Debtors, the bankruptcy court found that there were legitimate explanations for the errors, sufficient that the denial of conversion, which Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 371 (2007), limited to "extraordinary cases." Id. at 375, n.11, was not justified.
For a copy of the opinion, please see:
Nelson- Denial of Objection to Conversion from Chapter 7 to Chapter 13
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