Converting a Bankruptcy and Bad Faith
Bankruptcy Conversion to Chapter 7 Could Risk a Postpetition Asset if Debtor Acted in Bad Faith
In Pancic v Lokan (In re Lokan), BAP No. OR-22-1249-CLB, Bk. No. 6:20-bk-62593-TMR (9th Cir. BAP 6/14/2023)(unpublished opinion), the Bankruptcy Appellate Panel for the Ninth Circuit (“BAP”) held that the chapter 13 debtors converted their case to Chapter 7 in good faith and therefore a post-petition inheritance was not property of the chapter 7 estate.
Stephen and Brenda Lokan filed a Chapter 13 bankruptcy in Oregon on November 23, 2020 with unsecured claims of approximately $100,000. Their plan was confirmed with plan payments of $150 per month giving unsecured creditors about 10% of their claims.