The Debtors filed their Chapter 13 case, listing a 12.9% interest in a closely-held limited liability company. The LLC owned commercial real estate valued at $700,000, subject to a $178,000 lien. The value of the Debtors’ interest, $67,338, was discounted for marketability purposes.
Initially, the interest was valued at $6,000 and was later amended to reflect a discounted marketability value of $15,000. The valuation was disputed by the Chapter 13 Trustee. The Debtors obtained an opinion letter from a Chapter 7 Panel Trustee agreeing with the $15,000 valuation, which resulted in the withdrawal of the Chapter 13 Trustee’s objection and confirmation of the Debtors’ Chapter 13 plan. Approximately 3 years later, the LLC sold the commercial property and the Debtors received $76,405 in proceeds attributable to the 12.9% interest. Thereafter, the Trustee sought the entry of an order requiring the turnover of the proceeds and the modification of the plan to provide for the payment of the same.
The Court looked to the interplay of 11 U.S.C. §§ 1306(a)(1) and 1327(b) in addressing what constitutes post-confirmation property of the Chapter 13 bankruptcy estate. The Court applied the estate termination theory and held, under the facts and circumstances of the case, that the interest in the LLC was appropriately disclosed and reconciled in the best-interest-of-creditors test and revested with the Debtors upon confirmation. The Court allowed the Debtors to retain the proceeds from the post-confirmation sale and denied the Trustee’s motion for turnover and modification of the confirmed Chapter 13 plan.