United States Bankruptcy Court,
E. D. New York.
In re Joseph G. HANNAN, a/k/a Joe Hannan, Debtor.
Joseph G. HANNAN, Plaintiff,
v.
Kenneth KIRSCHENBAUM, as Trustee of the Estate of Joseph G. Hannan, Defendant.
Bankruptcy No. 181-11156-16.
Adv. No. 182-0337-16.
Nov. 3, 1982.
 Issue arose as to right to assets which debtor acquired after commencement of 
bankruptcy case.   The Bankruptcy Court, Cecelia H. Goetz, J., held that assets 
which debtor acquired between the time he filed for Chapter 13 and the time he 
converted to Chapter 7 belonged to the debtor and not the bankruptcy estate.
 Issue resolved.
West Headnotes
Bankruptcy  2558
51k2558 Most Cited Cases
(Formerly 51k148)
Assets which debtor acquired between the time he filed for Chapter 13 and the 
time he converted to Chapter 7 belonged to the debtor and not the bankruptcy 
estate.  Bankr.Code, 11 U.S.C.A. § §  348(a), 541, 1306(a, b); Bankr.Act, §  1 
et seq., 11 U.S.C. (1976 Ed.) §  1 et seq.
 *691 Charles R. Tropp, Staten Island, N.Y., for debtor-plaintiff.
 Kenneth Kirschenbaum, Garden City, N.Y., Chapter 13 trustee.
OPINION
 CECELIA H. GOETZ, Bankruptcy Judge, Acting for MANUEL J. PRICE, Bankruptcy 
Judge:
 The issue in this case is:  Does the Chapter 7 trustee, or the debtor, have the 
right to property which the debtor acquired after he filed for relief under 
Chapter 13, but before his proceeding was converted to Chapter 7.
 The facts in this case are not in dispute.   Joseph G. Hannan, the plaintiff- 
debtor, filed a petition under Chapter 13 on April 7, *692 1981.   His plan was 
never confirmed, and the proceeding was converted to one under Chapter 7 on 
November 9, 1981.   Between the time the debtor filed under Chapter 13, and the 
conversion to Chapter 7, he was involved in an automobile accident, giving rise 
to a claim for damages in excess of $7,500;  he accumulated $2,200 from his 
wages, which he deposited in his savings bank;  and his employer, who had 
continued withholding money pursuant to an income execution during the pendency 
of the Chapter 13 proceeding, had on hand substantial funds.   The employer may 
also have been in possession of monies deducted prior to the filing of the 
Chapter 13 petition.
 It is the Chapter 7 trustee's position that the debtor's negligence action, 
bank accounts, and the funds held by his employer, and deducted subsequent to 
the filing of the Chapter 13 petition, are assetsof the Chapter 7 estate. The 
debtor contends that, on the contrary, all such property belongs to the debtor.
DISCUSSION
 The problem arises because the definition of an "estate" for purposes of 
Chapter 13 is not the same as under Chapter 7.  Section 541, which applies both 
to Chapters 7 and 13, defines the "property of the estate" as "all legal or 
equitable interests of the debtor in property as of the commencement of the 
case."  (Emphasis supplied.)   However, §  1306(a) provides that "property of 
the estate" includes, in addition to the property specified in §  541: 
"all property * * * 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 
or 11 of this title, whichever occurs first;  and 
"(2) earnings from services performed by the debtor after the commencement of 
the case but before the case is closed, dismissed or converted to a case under 
Chapter 7 or 11 of this title, whichever occurs first."
 Section 1306(b) provides that the debtor remains in possession of all property 
of the estate, except as provided in his confirmed plan or the order confirming 
his plan.
 Essentially, the position of the trustee is that anything which becomes 
property of the estate while the proceeding is under Chapter 13 continues to be 
property of the estate when it is converted to Chapter 7.   The trustee, 
however, appears to give too little weight to §  348(a), which deals with the 
problems arising from conversion by providing that conversion "does not affect a 
change in the date of the filing of the petition, the commencement of the case 
or the order for relief."   This means that, for all purposes, the commencement 
of the proceeding brought by Joseph G. Hannan is April 7, 1981, and the property 
belonging to the estate is the property he had as of that date, not that which 
he acquired subsequently.
 The construction of the statutory language appears most consistent with the 
overall organization of the bankruptcy law and with precedent under the 
Bankruptcy Act of 1898.
 Chapters 7 and 13 are fundamentally different.   Under Chapter 7, a debtor 
secures release from his debts in exchange for all assets he owned when he seeks 
such exculpation.   Under Chapter 13, he agrees to commit some portion of his 
future income to the discharge of his debts (which explains why the definition 
of "property of the estate" includes after-acquired property), and in exchange 
he retains possession of all his property, except as provided in his plan.   In 
short, under Chapter 7, creditors are entitled to whatever are the assets of the 
debtor at the time he files for relief;  under Chapter 13, the creditors get 
only whatever the debtor agrees to devote to the repayment of their debts out of 
his future income.   When a Chapter 13 plan does not work out, the debtor has 
the privilege of converting to Chapter 7, and when he exercises that right, no 
reason of policy suggests itself why the creditors should not be put back in 
precisely the same position as they would have been had the debtor never sought 
to repay his debts by filing under Chapter 13.
 *693 Persuasive authority in support of this construction is Miller v. Woolley, 
141 F.2d 837 (9th Cir.1944), cert. denied, 323 U.S. 716, 65 S.Ct. 44, 89 L.Ed. 
576 (1944).   In that case, a debtor in a Chapter XI case was allowed $1,000 per 
week out of his earnings for living expenses, out of which an attorney received 
fees for representing the debtor in a divorce suit. Before the plan was fully 
consummated, the debtor died and was adjudicated a bankrupt.   The trustee 
sought to recover amounts paid to the debtor's attorney.   The court held that 
the adjudication related back to the original filing of the petition under 
Chapter XI;  that the debtor's earnings after adjudication were not subject to 
bankruptcy jurisdiction;  and that the bankruptcy court could not order 
repayment by the attorney to the trustee of amounts received from earnings.
 What the court said was: 
"The question as to * * * the debtor's use of the funds allowed him * * * is set 
at rest by the retroactive adjudication in bankruptcy which freed his earnings 
so far as the jurisdiction of the bankruptcy court is concerned from the claims 
of the bankruptcy court over his property."  Id. at 842.
 See also Wood v. Scott, 180 F.2d 252 (6th Cir.1950).
 In sum, the debtor is correct in asserting that the assets he acquired between 
the time he filed for Chapter 13, and the time he converted to Chapter 7, belong 
to him.   The deductions, if any, taken from his earnings prior to filing under 
Chapter 13 belong, however, in a different category:  they may well constitute 
assets of the estate, dependent upon facts not revealed by this record.
CONCLUSIONS OF LAW
 The trustee has no interest in any of the property which the debtor acquired 
subsequent to April 7, 1981, after the debtor filed a petition pursuant to 
Chapter 13 of Title 11 of the United States Code.
 The foregoing constitutes the Court's Findings of Fact and Conclusions of Law 
in this proceeding.
 Submit judgment.
24 B.R. 691, 7 Collier Bankr.Cas.2d 750, 9 Bankr.Ct.Dec. 1151, Bankr. L. Rep.  P 
68,876
END OF DOCUMENT
United States Bankruptcy Court,E. D. New York.
In re Joseph G. HANNAN, a/k/a Joe Hannan, Debtor.Joseph G. HANNAN, Plaintiff,v.Kenneth KIRSCHENBAUM, as Trustee of the Estate of Joseph G. Hannan, Defendant.
Bankruptcy No. 181-11156-16.Adv. No. 182-0337-16.
Nov. 3, 1982.

 Issue arose as to right to assets which debtor acquired after commencement of bankruptcy case.   The Bankruptcy Court, Cecelia H. Goetz, J., held that assets which debtor acquired between the time he filed for Chapter 13 and the time he converted to Chapter 7 belonged to the debtor and not the bankruptcy estate.
 Issue resolved.

West Headnotes
Bankruptcy  255851k2558 Most Cited Cases (Formerly 51k148)
Assets which debtor acquired between the time he filed for Chapter 13 and the time he converted to Chapter 7 belonged to the debtor and not the bankruptcy estate.  Bankr.Code, 11 U.S.C.A. § §  348(a), 541, 1306(a, b); Bankr.Act, §  1 et seq., 11 U.S.C. (1976 Ed.) §  1 et seq. *691 Charles R. Tropp, Staten Island, N.Y., for debtor-plaintiff.
 Kenneth Kirschenbaum, Garden City, N.Y., Chapter 13 trustee.

OPINION

 CECELIA H. GOETZ, Bankruptcy Judge, Acting for MANUEL J. PRICE, Bankruptcy Judge:
 The issue in this case is:  Does the Chapter 7 trustee, or the debtor, have the right to property which the debtor acquired after he filed for relief under Chapter 13, but before his proceeding was converted to Chapter 7.
 The facts in this case are not in dispute.   Joseph G. Hannan, the plaintiff- debtor, filed a petition under Chapter 13 on April 7, *692 1981.   His plan was never confirmed, and the proceeding was converted to one under Chapter 7 on November 9, 1981.   Between the time the debtor filed under Chapter 13, and the conversion to Chapter 7, he was involved in an automobile accident, giving rise to a claim for damages in excess of $7,500;  he accumulated $2,200 from his wages, which he deposited in his savings bank;  and his employer, who had continued withholding money pursuant to an income execution during the pendency of the Chapter 13 proceeding, had on hand substantial funds.   The employer may also have been in possession of monies deducted prior to the filing of the Chapter 13 petition.
 It is the Chapter 7 trustee's position that the debtor's negligence action, bank accounts, and the funds held by his employer, and deducted subsequent to the filing of the Chapter 13 petition, are assetsof the Chapter 7 estate. The debtor contends that, on the contrary, all such property belongs to the debtor.
DISCUSSION
 The problem arises because the definition of an "estate" for purposes of Chapter 13 is not the same as under Chapter 7.  Section 541, which applies both to Chapters 7 and 13, defines the "property of the estate" as "all legal or equitable interests of the debtor in property as of the commencement of the case."  (Emphasis supplied.)   However, §  1306(a) provides that "property of the estate" includes, in addition to the property specified in §  541: "all property * * * 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 or 11 of this title, whichever occurs first;  and "(2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed or converted to a case under Chapter 7 or 11 of this title, whichever occurs first."
 Section 1306(b) provides that the debtor remains in possession of all property of the estate, except as provided in his confirmed plan or the order confirming his plan.
 Essentially, the position of the trustee is that anything which becomes property of the estate while the proceeding is under Chapter 13 continues to be property of the estate when it is converted to Chapter 7.   The trustee, however, appears to give too little weight to §  348(a), which deals with the problems arising from conversion by providing that conversion "does not affect a change in the date of the filing of the petition, the commencement of the case or the order for relief."   This means that, for all purposes, the commencement of the proceeding brought by Joseph G. Hannan is April 7, 1981, and the property belonging to the estate is the property he had as of that date, not that which he acquired subsequently.
 The construction of the statutory language appears most consistent with the overall organization of the bankruptcy law and with precedent under the Bankruptcy Act of 1898.
 Chapters 7 and 13 are fundamentally different.   Under Chapter 7, a debtor secures release from his debts in exchange for all assets he owned when he seeks such exculpation.   Under Chapter 13, he agrees to commit some portion of his future income to the discharge of his debts (which explains why the definition of "property of the estate" includes after-acquired property), and in exchange he retains possession of all his property, except as provided in his plan.   In short, under Chapter 7, creditors are entitled to whatever are the assets of the debtor at the time he files for relief;  under Chapter 13, the creditors get only whatever the debtor agrees to devote to the repayment of their debts out of his future income.   When a Chapter 13 plan does not work out, the debtor has the privilege of converting to Chapter 7, and when he exercises that right, no reason of policy suggests itself why the creditors should not be put back in precisely the same position as they would have been had the debtor never sought to repay his debts by filing under Chapter 13.
 *693 Persuasive authority in support of this construction is Miller v. Woolley, 141 F.2d 837 (9th Cir.1944), cert. denied, 323 U.S. 716, 65 S.Ct. 44, 89 L.Ed. 576 (1944).   In that case, a debtor in a Chapter XI case was allowed $1,000 per week out of his earnings for living expenses, out of which an attorney received fees for representing the debtor in a divorce suit. Before the plan was fully consummated, the debtor died and was adjudicated a bankrupt.   The trustee sought to recover amounts paid to the debtor's attorney.   The court held that the adjudication related back to the original filing of the petition under Chapter XI;  that the debtor's earnings after adjudication were not subject to bankruptcy jurisdiction;  and that the bankruptcy court could not order repayment by the attorney to the trustee of amounts received from earnings.
 What the court said was: "The question as to * * * the debtor's use of the funds allowed him * * * is set at rest by the retroactive adjudication in bankruptcy which freed his earnings so far as the jurisdiction of the bankruptcy court is concerned from the claims of the bankruptcy court over his property."  Id. at 842.
 See also Wood v. Scott, 180 F.2d 252 (6th Cir.1950).
 In sum, the debtor is correct in asserting that the assets he acquired between the time he filed for Chapter 13, and the time he converted to Chapter 7, belong to him.   The deductions, if any, taken from his earnings prior to filing under Chapter 13 belong, however, in a different category:  they may well constitute assets of the estate, dependent upon facts not revealed by this record.
CONCLUSIONS OF LAW
 The trustee has no interest in any of the property which the debtor acquired subsequent to April 7, 1981, after the debtor filed a petition pursuant to Chapter 13 of Title 11 of the United States Code.
 The foregoing constitutes the Court's Findings of Fact and Conclusions of Law in this proceeding.
 Submit judgment.
24 B.R. 691, 7 Collier Bankr.Cas.2d 750, 9 Bankr.Ct.Dec. 1151, Bankr. L. Rep.  P 68,876
END OF DOCUMENT