A principled examination of US bankruptcy law and the accounting for value in conversions between chapters 7 and 13

Abstract

This article focuses on the apportionment and distribution of post-filing pre-conversion increases in equity of assets in a debtor’s estate when a debtor converts from a Chapter 13 to a Chapter 7 bankruptcy proceeding. Through an examination of the history of the US Bankruptcy Code and adequate examination of differing approaches, this article argues that courts should adopt the position that the post-filing increase in equity due to appreciation should inure to the estate rather than to the debtor, while the increases in equity through payback plans should inure to the debtor. This approach creates the fairest situation for a debtor, placing them in a situation where they receive the full benefits of the Chapter 13 bankruptcy proposition and provides sufficient economic benefits to creditors.