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Bell v. Bell (In re Bell) - 225 F.3d 203 (2d Cir. 2000)

Rule:

In an appeal from a district court's review of a bankruptcy court ruling, appellate review of the bankruptcy court is independent and plenary. The appellate courts accept its factual findings unless clearly erroneous, but review its conclusions of law de novo.

Facts:

On June 13, 1996, Wayne E. Bell, Jr. (the debtor) filed a petition for bankruptcy under Chapter 11. The debtor elected to take his state law exemptions. Among the assets that he claimed as exempt on his Schedule C filing were shares in Rockwell's Quality, a closely-held Vermont corporation, in which he was a principal officer and director. Fifteen months later, the case was converted to a Chapter 7 proceeding and an interim Chapter 7 trustee was appointed. The Chapter 7 Trustee filed an objection to the debtor's claimed exemption of the Rockwell stock on the grounds that the debtor had underestimated their value. The bankruptcy court sustained the trustee's objection to the exemption, rejecting the debtor's argument concluding that the claim for exemption was untimely since the objection had not been filed within 30 days of the Original Meeting of creditors. On review, the district court affirmed the bankruptcy court, holding that when a bankruptcy proceeding is converted from a Chapter 11 proceeding to a Chapter 7 proceeding, a new 30-day objection period begins to run from the conclusion of the post-conversion meeting of creditors. The debtor appealed to the Second Circuit Court of Appeals.

Issue:

Did the conversion of a case from Chapter 11 to Chapter 7 trigger a new period for objections?

Answer:

No.

Conclusion:

The appellate court held that the conversion did not reset the limitations period for filing objections to a debtor's claimed exemptions. Accordingly, the Court held in Bell’s case that no such renewed period for objections was triggered. According to the Court, the Chapter 7 trustee's objection was untimely, and absent timely objection, property claimed as exempt was exempt pursuant to 11 U.S.C.S. § 522(l) and revested in debtor. The Court added reasoning that a new period for objections furthermore would be incompatible with the debtor's substantive property rights in property timely exempted under § 522(l). The judgment of the district court was reversed and remanded for further proceedings.

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