Rickey Carroll v. John Logan

Filing

PUBLISHED AUTHORED OPINION filed. Originating case number: 09-01177-8-JRL. [999227376]. [13-1024]

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-1024

RICKEY DEAN CARROLL; CHERI CARROLL,
Debtors-Appellants,
v.
JOHN FLETCHER LOGAN,
Trustee – Appellee.

Appeal from the United States Bankruptcy Court for the Eastern
District of North Carolina, at Wilson. J. Rich Leonard, United
States Bankruptcy Judge. (09-01177-8-JRL)

Argued:

September 17, 2013

Decided:

October 28, 2013

Before NIEMEYER, WYNN, and FLOYD, Circuit Judges.

Affirmed by published opinion. Judge Wynn wrote the opinion, in
which Judge Niemeyer and Judge Floyd joined.

ARGUED: Cortney I. Walker, SASSER LAW FIRM, Cary, North
Carolina, for Appellants.
John Fletcher Logan, OFFICE OF THE
CHAPTER 13 TRUSTEE, Raleigh, North Carolina, for Appellee.
ON
BRIEF: Travis Sasser, SASSER LAW FIRM, Cary, North Carolina, for
Appellants.
Michael Brandon Burnett, OFFICE OF THE CHAPTER 13
TRUSTEE, Raleigh, North Carolina, for Appellee.

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WYNN, Circuit Judge:
This

appeal

concerns

whether

Bankruptcy

Code

Section

1306(a) extends the 180-day time limit under Bankruptcy Code
Section 541 for identifying property that may be included in a
bankruptcy estate.

Appellants Rickey Dean Carroll and Cheri

Carroll argue that the bankruptcy court erred by including an
inheritance that postdated their Chapter 13 bankruptcy petition
by

more

Because

than

180

Section

days
1306(a)

as

part

plainly

of

their

extends

bankruptcy
the

estate.

timeline

for

including “the kind” of property “specified in” Section 541 in
Chapter 13 bankruptcy estates, we affirm the bankruptcy court’s
inclusion

of

the

inheritance

in

the

Carrolls’

Chapter

13

bankruptcy estate.

I.
In February 2009, the Carrolls filed a joint petition for
relief under Chapter 13 of the Bankruptcy Code.

Under that

reorganization chapter, debtors with regular income pay back a
portion of their debts through a repayment plan.

The Carrolls’

repayment plan, approved in August 2009, required them to pay
$2,416 for 6 months followed by $2,480 for 54 months.
In August 2012, over three years after filing their Chapter
13 petition, the Carrolls notified the bankruptcy court that Mr.
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Carroll’s

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mother

had

died

consequence,

Mr.

approximately

$100,000.

inherited

Carroll

interest

in

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December

2011

anticipated

an

Because

before

their

Mr.

and

inheritance

Carroll

bankruptcy

that,

acquired

case

was

as

a
of

the

closed,

dismissed, or converted to a proceeding under another bankruptcy
code

chapter,

Carrolls’

the

Chapter

repayment

plan

13

trustee
include

to

moved
“an

to

modify

amount

of

the
the

Inheritance, if and when received, sufficient to pay in full all
of the allowed general unsecured claims . . . .”
Over

the

Carrolls’

objection,

the

J.A. 76.

bankruptcy

court

held

that Mr. Carroll’s inheritance was property of the bankruptcy
estate.
(Bankr.

In re Carroll, 09-01177-8-JRL, 2012 WL 5512356, at *1
E.D.N.C.

Nov.

14,

2012).

The

bankruptcy

court

thus

ordered that the inheritance be included in the Carrolls’ plan
to pay unsecured creditors, who, under the original repayment
plan, were expected to receive payment on 3.8% of their allowed
claims.

Id. at *2.

The Carrolls noticed their appeal, and the

bankruptcy court stayed its order and certified a direct appeal
to this Court.

II.
The sole issue on appeal is whether the bankruptcy court
properly included Mr. Carroll’s inheritance, which postdated the
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Carrolls’

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bankruptcy

bankruptcy estate.

petition

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by

more

than

180

days,

in

We review this issue of law de novo.

the

In re

Maharaj, 681 F.3d 558, 568 (4th Cir. 2012).
The interplay of Bankruptcy Code Sections 541 and 1306 is
at the heart of this dispute.
statutes’ plain language.

We begin our analysis with the

“In arriving at the plain meaning, we

. . . assume that the legislature used words that meant what it
intended; that all words had a purpose and were meant to be read
consistently; and that the statute’s true meaning provides a
rational response to the relevant situation.”

Salomon Forex,

Inc. v. Tauber, 8 F.3d 966, 975 (4th Cir. 1993).
Bankruptcy

Code

Section

541

identifies

included in bankruptcy estates generally.
statute,

which

is

not

specific

to

the

property

11 U.S.C. § 541.

any

particular

type

The
of

bankruptcy proceeding, includes in estates:
5) Any interest in property that would have been
property of the estate if such interest had been an
interest of the debtor on the date of the filing of
the petition, and that the debtor acquires or becomes
entitled to acquire within 180
days after such date-(A) by bequest, devise, or inheritance[.]
11 U.S.C. § 541(a)(5) (emphasis added).
Section

1306(a)

then

expands

the

definition

of

estate

property for Chapter 13 cases specifically, stating:
(a) Property of the estate includes, in addition to
the property specified in section 541 of [the Code]--

4

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(1) all property of the kind specified in such section
that the debtor acquires after the commencement of the
case but before the case is closed, dismissed, or
converted to a case under chapter 7, 11, or 12 of [the
Code], whichever occurs first; and
11 U.S.C. § 1306(a) (emphasis added).
Congress has harmonized these two statutes for us.
Section

541,

Congress

bankruptcy estates.

established

a

general

With

definition

for

With Section 1306, it then expanded on that

definition specifically for purposes of Chapter 13 cases.

Thus,

“Section 1306 broadens the definition of property of the estate
for chapter 13 purposes to include all property acquired and all
earnings

from

commencement

of

services
the

performed

case.”

S.

by

the

debtor

after

Rep.

No.

95-989,

at

the

140-41

(1978).
The statutes’ plain language manifests Congress’s intent to
expand

the

estate

for

Chapter

13

purposes

by

capturing

the

types, or “kind,” of property described in Section 541 (such as
bequests,

devises,

and

temporal restriction.

inheritances),

but

11 U.S.C. § 1306(a).

not

the

180–day

This is because

“[t]he kind of property is a distinct concept from the time at
which the debtor’s interest in the property was acquired.”

In

re Tinney, 07-42020-JJR13, 2012 WL 2742457, at *2 (Bankr. N.D.
Ala.

July

9,

2012).

And

on

its

face,

Section

1306(a)

incorporates only the kind of property described in Section 541
into its expanded temporal framework.
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In essence, Section 1306 is a straightforward formula for
calculating Chapter 13 estates:
A Chapter 13
Bankruptcy
=
Estate

=

Property
described
in Section 541

+

The kind of property
(e.g., inheritances)
described in Section
541 and acquired
before the Chapter
13 case is closed,
dismissed, or
converted

See 11 U.S.C. 1306(a).
Section

1306’s

extension

of

a

Chapter

13

bankruptcy

estate’s reach until the Chapter 13 case is closed, dismissed,
or converted constitutes “a rational response to the relevant
situation.”
proceedings

Salomon
provide

Forex,

debtors

8
with

F.3d

at

975.

significant

Chapter

benefits:

13
For

example, debtors may retain encumbered assets and have their
defaults cured, while secured creditors have long-term payment
plans

imposed

upon

them

and

unsecured

creditors

payment on only a fraction of their claims.
§§

may

receive

See 11 U.S.C.

1322, 1325. 1

1

By contrast, in Chapter 7 liquidation proceedings, a
debtor’s estate is largely subject to liquidation.
Generally,
the estate is “identified with a snapshot taken of the debtor’s
property when his petition for relief is filed.” In re Tinney,
2012 WL 2742457, at *2. And the secured creditors are soon free
to foreclose on mortgages and repossess encumbered cars and
other property.
Id.
In turn, the debtor is not subject to
multi-year repayment obligations.
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In exchange for those benefits, a Chapter 13 debtor makes a
multi-year

commitment

confirmed plan.

Id.

to

repay

obligations

under

a

court-

The repayment plan remains subject to

modification for reasons including a debtor’s decreased ability
to pay according to plan, as well as the debtor’s increased
ability to pay.
before,

“[w]hen

See 11 U.S.C. §
a

[Chapter

13]

1329.
debtor’s

As we have stated
financial

fortunes

improve, the creditors should share some of the wealth.”

In re

Arnold, 869 F.2d 240, 243 (4th Cir. 1989). 2
The overwhelming majority of courts to have addressed this
issue “agree that § 1306 modifies the § 541 time period in
Chapter 13 cases.”
(B.A.P.

10th

Cir.

Tinney,

2012

WL

In re Vannordstrand, 356 B.R. 788, at *2
2007)

(collecting

2742457,

at

*1

cases);

(noting

see

that

also
“[t]he

In

re

large

majority of courts to address the issue agree” and collecting
cases).

Several

factly.

See, e.g.,

treatises

state

the

proposition

matter-of-

Hon. Joan N. Feeney, Bankruptcy Law Manual

2

In In re Arnold, we did not address Sections 541 and 1306.
Nevertheless, we had to decide whether a $120,000 increase in
the debtor’s annual income warranted modification of his Chapter
13 repayment plan.
We held that the bankruptcy court did not
abuse its discretion by increasing the debtor’s plan payments to
account for his substantially increased income. “It is grossly
unfair for a debtor, who experiences an increase in yearly
income of $120,000, to refuse to share some of that with
creditors who are getting no more than 20 cents on the dollar
for their claims under the original Chapter 13 plan.”
In re
Arnold, 869 F.2d at 243.
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§ 13:13 (5th ed. 2013) (“Significantly, property of the estate
in Chapter 13 cases is a broader concept as it includes property
also described in § 1306, which supplements § 541’s definition
of property of the estate of Chapter 13 debtors.”); 8A Corpus
Juris

Secundum

Bankruptcy

§

561

(2013)

(“In

a

Chapter

13

individual debt adjudgment case, the estate includes property of
the kind generally included in estates, notwithstanding the fact
that

such

property

commencement

of

is

the

acquired

case

but

by

the

before

debtor

the

case

after
is

the

closed,

dismissed, or converted to a case under Chapter 7, 11, or 12 . .
. .”).
“adds

And even this Court has indicated that Section 1306(a)
certain

property

Chapter 13 context.”
The

Carrolls

to

a

§

541

bankruptcy

estate

in

the

In re Maharaj, 681 F.3d at 564. 3
nevertheless

contend

that

Mr.

Carroll’s

inheritance should be excluded from their Chapter 13 bankruptcy
estate

under

principle

two

that

principles

courts

“must

of

statutory

give

effect

interpretation:
to

every

word

the
of

a

statute,” and the principle that “specific language in a statute
governs general language.”

Appellants’ Br. at 8-9.

We are

convinced by neither argument.
3

We recognize that a couple of courts have taken a contrary
view. See In re Key, 465 B.R. 709, 712 (Bankr. S.D. Ga. 2012);
In re Walsh, 07-60774, 2011 WL 2621018, at *2 (Bankr. S.D. Ga.
June 15, 2011); and In re Schlottman, 319 B.R. 23, 24-25 (Bankr.
M.D. Fla. 2004).
However, we find those outlier cases
unconvincing.
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Unquestionably, we agree that courts should give effect to
every word of a statute whenever possible.
624 F.3d 670, 677 (4th Cir. 2010).
us

to

reject

the

Carrolls’

Broughman v. Carver,

And doing so here requires

argument.

For

if

Section

541’s

180-day rule restricts what is included in a Chapter 13 estate,
then Section 1306(a), which expands the temporal restriction for
Chapter 13 purposes, loses all meaning.

By contrast, neither

statute is rendered superfluous, and both are given effect, if
Section 1306(a)’s extended timing applies to Chapter 13 estates
and supplements Section 541 with property acquired before the
Chapter 13 case is closed, dismissed, or converted.
Further, while we know well the “canon of construction that
‘the specific governs the general,’” Broughman, 624 F.3d at 676,
applying that canon here does not further the Carrolls’ cause.
In particular, we reject the Carrolls’ contention that Section
541(a)(5) is “specific” while Section 1306(a) is “general.”

On

the

13

contrary,

Section

1306(a)

is

specific

to

Chapter

bankruptcies and defines estates solely for purposes of that
reorganization chapter.

Section 541, by contrast, is a general

provision that provides generic contours for bankruptcy estates.
Thus, even under the two statutory interpretation principles the
Carrolls

press,

the

bankruptcy

court

properly

included

inherited property in the Carrolls’ bankruptcy estate.

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the

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III.
The Supreme Court has eschewed interpreting the Bankruptcy
Code such that it “would deny creditors payments that the debtor
could easily make.”
(2010).

The

plain

Hamilton v. Lanning, 130 S. Ct. 2464, 2476
language

of

Section

1306(a)

blocks

the

Carrolls from depriving their creditors a part of their windfall
acquired before their Chapter 13 case was closed, dismissed, or
converted.

Accordingly,

the

bankruptcy

court

correctly

held

that Mr. Carroll’s inheritance was property of the bankruptcy
estate under Section 1306(a).

AFFIRMED

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