Who Is Entitled to Post-Filing Value Appreciation?

What happens if an asset owned by the bankruptcy debtor appreciates in value after the bankruptcy is filed? I received an email from a debtor in Arizona who complained that his Chapter 7 Trustee would not credit him with post-filing appreciation in a non-exempt asset which was part of the bankruptcy estate. He believes that all the Chapter 7 trustee is entitled to is the value of estate assets on filing date. I think the debtor is incorrect, although I have never heard anyone raise this issue.

I think this debtor is confusing two concepts about what constitutes a Chapter 7 bankruptcy estate. The bankruptcy estate consist of all assets, including rights, powers, and equitable interests, which the debtor has on the date of filing. If the debtor acquires new assets after filing bankruptcy those new assets belong to the debtor and not to the Chapter 7 trustee. However, if an asset of the estate appreciates in value during the administration of the bankruptcy estate I do not believe the Trustee or the creditors are limited to the value on filing date or that they owe back to the debtor any amounts of post-filing passive appreciation.

On the other hand, if the issue is whether the value of a bankruptcy asset is above or below a dollar exemption limit, I understand that value on date of filing is the controlling value. For instance, if a debtor owns a homestead which is worth $125,000 at the time of filing, and if the applicable homestead exemption is $125,000, the homestead is exempt even if it appreciates in value after the filing date. The above represents my understanding; please tell me if its incorrect.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida