In re Neidorf
Facts: A property owner files a Chapter 7 bankruptcy petition, listing their residence as an asset of their estate. The mortgage holder obtains relief from the automatic stay triggered by the bankruptcy filing and forecloses on the owner’s residence. Five years later, while the owner’s bankruptcy case is pending, the owner receives a post-petition foreclosure payment from the mortgage holder pursuant to a national settlement between banking regulators and specific financial institutions.
Claim: The bankruptcy trustee seeks the owner’s turnover of the foreclosure settlement payment claiming the settlement payment was related to the foreclosed property and thus an asset of the bankruptcy estate since the settlement was received while the bankruptcy case was still pending.
Counterclaim: The owner claims the bankruptcy trustee is not entitled to the payment since it was an award resulting from a settlement, not a creation of property by the estate, and is thus not an asset of the bankruptcy estate.
Holding: A bankruptcy court holds the bankruptcy trustee is not entitled to the foreclosure settlement payment since the payment was awarded post-petition pursuant to a settlement, not a creation of property by the estate, and is thus not an asset of the bankruptcy estate. [In re Neidorf (9th Cir. BAP 2015) 534 BR 369]
