United States Bankruptcy Appellate Panel

For the Eighth Circuit

___________________________

No. 12-6054

___________________________

In re: Michelle Ann Klein-Swanson, As surety for Yarn Café Inc.; Scott Lawrence

Swanson, As surety for Yarn Café Inc.

lllllllllllllllllllllDebtors

------------------------------

Randall L. Seaver, Trustee

lllllllllllllllllllll Plaintiff - Appellee

v.

Michelle Ann Klein-Swanson

lllllllllllllllllllll Defendant - Appellant

 ____________

 Appeal from United States Bankruptcy Court 

for the District of Minnesota - Minneapolis

 ____________

 Submitted: February 21, 2013

 Filed: March 22, 2013

____________

Before FEDERMAN, Chief Judge, SCHERMER and NAIL, Bankruptcy Judges. 

____________

 SCHERMER, Bankruptcy Judge
Michelle Ann Klein-Swanson (the “Debtor”) appeals from a judgment of the

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bankruptcy court: (a) revoking the Debtor’s discharge pursuant to 11 U.S.C. §

727(d)(2); (b) avoiding the transfer under 11 U.S.C. § 549 of bonus funds she

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received postpetition from her employer and entering judgment for recovery of those

funds by the Chapter 7 trustee, Randall L. Seaver (the “Trustee”), pursuant to 11

U.S.C. § 550; and (c) granting a motion for costs filed by the Trustee pursuant to

FederalRule ofBankruptcyProcedure 7054(b). We have jurisdiction over this appeal

from the final judgment of the bankruptcy court. See 28 U.S.C. § 158(b). For the

reasons set forth below, we reverse.

ISSUE

The central issue in this appeal is whether bonus payments received

postpetition by the Debtor from her employer were property of the Debtor’s

bankruptcy estate pursuant to 11 U.S.C. § 541. Because we hold that the bonus

payments were not property of the Debtor’s bankruptcy estate, we must reverse the

bankruptcy court’s: (a) revocation of the Debtor’s discharge under 11 U.S.C. §

727(d)(2); (b) avoidance of the transfer of the bonus funds under 11 U.S.C. § 549

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In her Notice of Appeal, the Debtor states that she also appeals from a

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July 2011 order granting summary judgment. The summary judgment order was not

a final order. Rather, the decision reached in that order was incorporated into the

bankruptcy court’s judgment of September 20, 2012.

The bankruptcy court’s judgment erroneously cites 11 U.S.C. §

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707(d)(2), rather than 11 U.S.C. § 727(d)(2), with respect to revocation of the

Debtor’s discharge, which we consider to be a typographical error.

The bankruptcy court discussed various omissions and misstatements 3

that it believed the Debtor made on her Schedules and Statement of Financial Affairs

other than the Debtor's failure to disclose the bonuses from her employer. However,

the Trustee’s Complaint speaks only of the bonuses and the Trustee conceded as

much at trial when his counsel said “[n]ow, we’re only seeking and I think we made

this clear to revoke based upon her concealment of the two bonuses and failure to

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and recovery of those funds under 11 U.S.C. § 550; and (c) granting the Trustee’s

motion for costs under Federal Rule of Bankruptcy Procedure 7054(b). 

BACKGROUND

On January 19, 2009, the Debtor (together with her husband) filed a voluntary

petition for relief under Chapter 7 of Title 11 of the United States Code (the

“Bankruptcy Code”). In April 2009, an order was entered granting the Debtor and

her husband a Chapter 7 discharge. 

The Debtor has been employed by International Business Machines (“IBM”)

since 1996, and she continued to be employed by IBM on the petition date. In

October 2007 the Debtor changed her position atIBM to become the Client Executive

for Oracle Alliance. 

On the petition date, the Debtor was eligible to receive bonuses under two IBM

programs: (a) the Excellence Award; and (b) the Growth Driven Profit (“GDP”)

program. IBM determined bonuses using a calendar year. The bankruptcy court

made extensive findings of fact, many of which are not relevant in light of our

decision that the IBM bonuses were not property of the Debtor’s estate. We set forth

only those facts that are relevant to our decision. 

The Excellence Award was a quarterly bonus program whereby, each quarter,

IBM was permitted to allocate funds for Excellence Awards to work teams. The team

supervisor was then charged with deciding, based on each member’s performance

during the quarter, how much, if any, of the Excellence Award funds for her team

disclose and failure to pay them over. The other thingsthat we talked about, the eight

or nine or ten things, were all introduced to establish the requisite fraudulent intent.” 

The bankruptcy court discussed the Debtor’s other omissions and misstatements to

demonstrate the Debtor’s fraudulent intent regarding the bonuses, and it revoked the

Debtor’s discharge solely based on the Debtor’s conduct with respect to the bonuses. 

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would go to each member. The decision to make an award was entirely within IBM’s

discretion. No member of the team was guaranteed an Excellence Award. The

supervisor announced the awards after the close of the calendar quarter and, through

the regular payroll process, IBM paid the bonuses about sixty days after the close of

the quarter. In February 2009 (postpetition), the Debtor received an Excellence

Award in the amount of $8,000 for work she had performed during the fourth

calendar quarter of 2008. 

In addition to the Excellence Award, the Debtor also received a GDP bonus. 

In March 2009, the Debtor received the GDP program payment of $16,072 for the

year 2008. IBM based GDP bonus payments on the “personal business commitment”

of an employee (an employee performance metric used by IBM) and IBM’s yearover-year profit and growth. IBM usually paid these bonuses about sixty days after

the January announcement of its operating resultsfromthe year. Like the Excellence

Award, the decision whether to make a GDP program payment was in the complete

discretion of IBM: the GDP program documents state that “[n]o employee earns or

otherwise becomes entitled to payment, or any portion of a payment, under the GDP

program prior to payment by IBM.”

Prior to filing her bankruptcy petition, the Debtor had completed all tasks

within her control toward obtaining an award under either of the bonus programs. 

However, the awards to the Debtor of the Excellence Award and the GDP bonus were

within the complete discretion of IBM; IBM had the right to decide it would not make

any award to the Debtor under either program. No evidence indicated that IBM

decided to make the awards to the Debtor prior to the petition date. And the Debtor

was not notified thatshe would receive a payment under either programuntil after she

filed her bankruptcy petition. 

The Debtor did not disclose her eligibility for or any interest in the Excellence

Award or a GDP bonus in her bankruptcy Schedules or Statement of Financial

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Affairs. Although the Debtor was notified that she would receive, and she had

already been paid, the $8,000 Excellence Award by the time of her § 341 meeting of

creditors, she did not bring this to the attention of the Trustee. After the § 341

meeting, the Debtor received the GDP bonus. After her § 341 meeting, the Debtor

engaged in communications with the Trustee regarding her receipt of the Excellence

Award for the fourth quarter of 2008, but she did not mention the GDP bonus to the

Trustee.

TheTrustee brought an adversary proceeding against the Debtor, asserting five

counts in his Complaint: Count I was a state law claim for conversion of the two

bonus payments; Count II was a state law civil theft claim; Count III was withdrawn

before trial; Count IV was a claim for avoidance and recovery under Bankruptcy

Code §§ 549 and 550 based on the Debtor’s alleged postpetition transfer of the IBM

bonuses to herself; and Count V sought revocation of the Debtor’s discharge under

Bankruptcy Code § 727(d)(2). 

Through a July 2011 order, the bankruptcy court granted partial summary

judgment. As stated by the bankruptcy court in its “Findings of Fact, Conclusions

of Law, and Order for Judgment on Counts Four and Five and Report and

Recommendation on Counts One and Two” (the “Findings and Order”) issued after

trial, the court’s grant of summary judgment “held that the bonuses were contingent

interests, received for work completed prepetition, and were thus property of the

bankruptcy estate under 11 U.S.C. § 541(a)(1).” In its Findings and Order, the

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bankruptcy court ordered that: (a) pursuant to § 727(d)(2), the Debtor’s discharge

would be revoked (Count V); and (b) pursuant to §§ 549 and 550 (Count IV), the

Trustee could recover from the Debtor the value of the two bonuses. The bankruptcy

Sections 541(a)(6) and(7) were also discussed in the summary judgment

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pleadings.

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court issued a report and recommendation to the District Court on Count I (state law

conversion) and Count II (state law civil theft). 

Upon the motion of the Trustee, the District Court dismissed Counts I and II

of the Complaint, quoting the bankruptcy court and stating that such dismissal had

no effect on the determination that “the bonuses in the amount of $24,072 received

postpetition by Defendant Michelle Ann Klein-Swanson are property of the

bankruptcy estate,” and it remanded the action to the bankruptcy court for entry of

judgment on Counts IV and V. Thereafter, the bankruptcy court issued a single

document entering judgment against the Debtor under CountsIV and V, and granting

a motion by the Trustee for costs under Federal Rule of Bankruptcy Procedure

7054(b).

STANDARD OF REVIEW

A bankruptcy court’s findings of fact are reviewed for clear error and its

conclusions of law are reviewed de novo. Drewes v. Vote (In re Vote), 276 F.3d

1024, 1026 (8th Cir. 2002) (citations omitted). “Whether property is included in the

bankruptcy estate is a question of law.” Id. (citing Ramsay v. Dowden (In re Cent.

Ark. Broad. Co.), 68 F.3d 213, 214 (8th Cir. 1995) (citation omitted)); Law v. Stover

(In re Law), 336 B.R. 780, 781 (B.A.P. 8th Cir. 2006). The bankruptcy court’s grant

ofsummary judgment isreviewed de novo. Paul v. Allred (In re Paul), ___ B.R. ___,

2013 WL709562, at *2 (B.A.P. 8th Cir. Feb. 28, 2013) (citing Peter v. Wedl, 155 F.3d

992, 996 (8th Cir. 1998)).

DISCUSSION

I. 11 U.S.C. § 541(a)

Section 541 of the Bankruptcy Code defines property of a debtor’s bankruptcy

estate broadly to include generally “all legal or equitable interests of the debtor in

property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Also included

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in the definition of “property of the estate” are: “(6) [p]roceeds, product, offspring,

rents, or profits of or from property of the estate, except such as are earnings from

services performed by an individual debtor after the commencement of the case” and

“(7) [a]ny interest in property that the estate acquires after the commencement of the

case.” 11 U.S.C. §§ 541(a)(6) and (7). The party seeking to include property in the

estate bears the burden of showing that the item is property of the estate. DeBold v.

Case (In re Tri-River Trading, LLC), 329 B.R. 252, 263-64 (B.A.P. 8th Cir. 2005),

aff’d 452 F.3d 756 (8th Cir. 2006). 

“The legislative history of the 1978 Bankruptcy Code makes clear that despite

the broad scope of § 541, it ‘is not intended to expend [sic] the debtor’s rights against

others more than they exist at the commencement of the case.’ ” Vote, 276 F.3d at

1026 (quoting S. Rep. No. 95-989, at 82, reprinted in 1978 U.S.C.C.A.N. 5787,

5868.). 

“Property interests are created and defined by state law. Unless some federal

interest requires a different result, there is no reason why such interests should be

analyzed differently simply because an interested party is involved in a bankruptcy

proceeding.” Butner v. United States, 440 U.S. 48, 55 (1979); Reagan v. Regions

Bank (In re Wetzel), 649 F.3d 831, 834-35 (8th Cir. 2011) (“While federal law

controls whether the interest is property of [the debtor’s] bankruptcy estate, [state]

law defines the nature and extent of that interest.”) (citations omitted). 

A. 11 U.S.C. § 541(a)(1)

The Trustee claims that (as the bankruptcy court determined), at the

commencement of the Debtor’s bankruptcy case, the Debtor had a contingent interest

in the IBM Excellence Award and GDP bonus, rendering such payments property of

the Debtor’s estate. We disagree. As of the petition date, the Debtor had no interest

(contingent or otherwise) in the payments from IBM because IBM had the absolute

discretion to decide that it would not make an award to the Debtor under either of its

programs. The Trustee asserts that the estate had a contingent interest in the bonuses

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because the Debtor’s receipt of such bonuses came from the Debtor’s prepetition

services and IBM bonus programs that were in place prepetition. The Trustee also

notes that the Debtor was eligible for the bonuses on the petition date. But IBM did

not exercise its discretion to award the bonuses until postpetition and, as of the

petition date, the Debtor had nothing more than a hope or expectation that she would

receive the payments. The awards were made postpetition and they rightfully belong

to the Debtor. 

According to the Trustee, the contingency that existed on the petition date was

IBM’s exercise of its discretion to make awards to the Debtor. But before IBM

actually exercised its discretion postpetition, the Debtor had no interest in either

bonus pool. Therefore, according to the Trustee’s logic, on the petition date the

Debtor would have had a contingent interest in nothing. 

Under Minnesota law, no offer has been made by an employer and an employee

has no contract for funds under an employer’s award program, when the employer

maintains the right to decide in its sole discretion whether it will award such funds

to the employee. See Chambers v. The Travelers Cos., Inc., 764 F. Supp. 2d 1071,

1087 (D. Minn. 2011); aff’d 668 F.3d 559, 565-66 (8th Cir. 2012); Grenier v. Air

Express Int’l Corp., 132 F.Supp 2d 1198 (D. Minn. 2001). The Trustee has shown

no basis for the proposition that the Debtor had a legal or equitable interest in the

bonuses as of the petition date. He cites Blacque v. Kalman, 30 N.W.2d 599 (Minn.

1948), as support for his belief that the Debtor had a contingent interest in the award

payments from IBM as of the petition date. The Blacque court decided whether the

purpose of creating a testamentary trust had been fully accomplished in light of the

interests of contingent beneficiaries. We do not interpret that case to define whether

the Debtor had an interest, contingent or otherwise, for the purposes of this appeal. 

The facts that: (a) the payments from IBM to the Debtor were based on her

prepetition employment; (b) the bonus programs existed on the petition date; and (c)

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the Debtor was eligible for the bonuses on the petition date, do not render the bonus

payments property of the Debtor’s bankruptcy estate. In Drewes v. Vote (In re Vote),

276 F.3d 1024 (8th Cir. 2002), Mr. Vote (a farmer) had “no interest of any kind” in

government compensation for crop loss as of the petition date. Id. at 1027. Rather,

after Mr. Vote filed his bankruptcy petition, Congress passed a law that provided

assistance to farmers and Mr. Vote received payments from this program that were

for his prepetition crop losses. Id at 1026. The court held that the payments received

by Mr. Vote were not property of his bankruptcy estate. Id. at 1026-27. 5

The trustee in Vote argued that the crop loss payments were property of the

estate under Segal v. Rochelle, 382 U.S. 375 (1966). Id. at 1026. The bankruptcy

court and the Trustee in this case also rely on Segal. In Segal, the Supreme Court

held that a tax refund loss-carryback claim was included in property of the debtors’

estates where the losses occurred prepetition and the taxes for the carry back years

had been paid, but the refund could not be claimed until postpetition under the

applicable tax laws. Segal, 382 U.S. 375. The Court in Segal stated “[t]urning to the

loss-carryback refund claimin this case, we believe it issufficiently rooted in the prebankruptcy past and so little entangled with the bankrupts’ ability to make an

unencumbered fresh start that it should be regarded as ‘property’ . . . .” Id. at 380. As

stated by the Vote court “[i]n Segal, the Court held that the debtor had an existing

interest in a tax refund and found that the debtor’s interest in a loss carryback under

the tax code was ‘sufficiently rooted in the pre-bankruptcy past’ to be included as

property of the estate.” Vote, 276 F.3d at 1026 (quoting Segal, 382 U.S. at 380).

The Vote court distinguished the facts in that case from the facts in Segal. It

noted that the applicable law in Segal wasin place on the petition date and, therefore,

the Segal debtors had an “existing interest” in a tax refund on the petition date. Vote,

The Vote court also rejected an argument by the Trustee made under §

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541(a)(7). We discuss § 541(a)(7) in more detail below.

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276 F.3d at 1026. In Vote, the relevant law had not been enacted as of the petition

date and Mr. Vote had “a mere hope that his losses might generate revenue in the

future.” Id. The Vote court found it important that the estate not obtain rights greater

than what Mr. Vote held on the petition date. Id. (“To find for the trustee on the

basis that the payments were ‘sufficiently rooted’ would allow the trustee to assert

more rights than [Mr.] Vote had at the commencement of his case.”).

The facts of this case are also distinguishable from those in Segal, and reliance

by the bankruptcy court on Segal ‘s “sufficiently rooted” test was improper. Even

though the Segal debtors could not formally make the loss-carryback refund claim

under the applicable statutes until a date postpetition, the losses had already occurred

and the debtors had an interest in the refund as of the petition date. The tax laws were

set and all that was left for the debtors to do was to make the claim. In contrast, the

decision whether to make the award payments was completely within IBM’s control. 

Like Mr. Vote, as of the petition date the Debtor had nothing more than a hope that

she would receive the award payments from IBM. To consider the payment to be

property of her estate simply because it related to her prepetition employment would

be to give the bankruptcy estate more than the Debtor had on the petition date. 

The bankruptcy court and the Trustee maintain that Stoebner v. Wick (In re

Wick), 276 F.3d 412 (8th Cir. 2002), aff’g 249 B.R. 900 (Bankr. D. Minn. 2000), 

supports the proposition that the Debtor’s IBM bonuses were property of the estate. 

As part of the sale of Ms. Wick’s company, Ms. Wick had the option to require the

company to issue to her shares of the company’s stock after she remained an

employee of the company for one year post-sale. Id at 414. Ms. Wick filed her

Chapter 7 bankruptcy petition four months into the one-year period. Id at 413. The

Eighth Circuit noted that “[t]he parties agree that upon filing Ms. Wick’s options

became property of her bankruptcy estate.” Id. at 415. And the court stated that

“[t]he fact that the options were unvested and contingent on Ms. Wick’s continued

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employment does not alter the fact that they were property of the estate.” Id. (citing

Allen v. Levey (In re Allen), 226 B.R. 857, 865-66 (Bankr. N.D. Ill. 1998).6

On the petition date Ms. Wick had an interest in property, as stated by the

bankruptcy court, Ms. Wick had “a contract right to receive stock in [the company],

contingent upon [Ms.] Wick completing one year of employment.” Stoebner v. Wick

(In re Wick), 249 B.R. 900, 909 (Bankr. D. Minn. 2000), aff’d 276 F.3d 412. It did

not matter that Ms. Wick was required to perform postpetition services. Id. In

contrast, the Debtor here had nothing more than a hope that she would receive the

bonus payments from IBM. IBM had the complete discretion to decide that the

Debtor would receive nothing. Wick does not stand for the proposition that the

Debtor held an interest that was property of her estate.

Contrary to the belief of the bankruptcy court and the Trustee, Booth v.

Vaughan (In re Booth), 260 B.R. 281 (B.A.P. 6th Cir. 2001), is not on point, and it

failsto provide support for the proposition that the Debtor held an interest in the IBM

award payments that would make such payments property of her bankruptcy estate. 

Under a profit sharing program, Mr. Booth was entitled to a pay out from his

employer as long as, by the end of the calendar year, the employer made a profit and

Mr. Booth was still employed. Id. at 284. Mr. Booth filed his bankruptcy petition

before the end of the calendar year and, postpetition he received a profit sharing

payment for the year during which he filed his bankruptcy petition. Id. The court

ruled that the portion of the profit sharing payment attributable to Mr. Booth’s

prepetition earnings was property of his bankruptcy estate. Id. at 290. 

The Eighth Circuit’s opinion in Wick primarily addresses other issues. 

6

Under Bankruptcy Code § 541(a)(6), the proceeds of the stock options attributable

to Ms. Wick’s prepetition services were property of the estate and Ms. Wick was

entitled to the proceeds attributable to her postpetition labor. Wick, 276 F.3d at 416-

17. We discuss § 541(a)(6) in more detail below. Wick also addressed an exemption

issue.

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On the petition date, Mr. Booth held the right to payment provided that the

employer made a profit and Mr. Booth was still employed, and the court stated that

Mr. Booth’s interest was a contingent interest under applicable state law. Id. at 284-

85. Mr. Booth’s employer did not reserve the discretion to decide whether it would

make the payment. In contrast, as of the petition date, the Debtor here had no

cognizable interest in the payments from IBM; she had only a hope that IBM would

exercise its discretion to award the payments. 

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The Debtor cites to cases where bonuses were not property of the estate when

employers maintained postpetition discretion regardingwhether to make such awards.

See, e.g., Lewis v. Chappo (In re Chappo), 257 B.R. 852 (E.D. Mich. 2001); Sharp

v. Dery, 253 B.R. 204 (E.D. Mich. 2000); Vogel v. Palmer, 57 B.R. 332 (Bankr. W.D.

Va. 1986). Based on the Booth court’s criticism of a statement by the Sharp court

8

that “[t]he determinative issue in this case, therefore, is whether Debtor had an

enforceable right to receive the bonus check when he filed his petition. . . .” the

Trustee claims that cases cited by the Debtor from the Sixth Circuit are “irrelevant”

because “the enforceability of a bonus right between an individual and her employer

is irrelevant in determining whether a potential bonus is property of the estate.” 

Booth, 260 B.R. at 289-90; Sharp, 253 B.R. at 207. Notwithstanding the enforceable

right issue, the cases cited by the Debtor share the common fact that the employer

maintained discretion to decide whether it would make an award to the employee. 

And for the purposes of this appeal, it is not important whether a debtor’s interest

must be enforceable on the petition date to be property of the estate. The Debtor had

None of the additional cases cited by the Trustee, or by the bankruptcy 7

court in its Findings and Order, convince us that the IBM bonuses were property of

the Debtor’s estate. 

We express no opinion regarding the reasoning and decisions made by 8

these courts with respect to other details of the relevant bonuses or employer plans. 

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no right to or interest in the IBM bonuses (enforceable or unenforceable, contingent

or otherwise) on the petition date. 

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B. 11 U.S.C. §§ 541(a)(6) and (7) 

The Trustee argues further that the “entire value” of the award payments is

property of the Debtor’s estate pursuant to Bankruptcy Code §§ 541(a)(6) and (7). 

Because we rule that the award payments were never property of the estate in the first

instance, it follows that the §§ 541(a)(6) and (7) are inapplicable. 

Section 541(a)(6) includes in property of the estate “(6) [p]roceeds, product,

offspring, rents, or profits of or from property of the estate, except such as are

earnings from services performed by an individual debtor after the commencement

of the case.” See Wick, 276 F.3d at 416-17 (estate’s interest in proceeds of stock

option limited to those proceeds attributable to prepetition services of debtor). The

Trustee posits that the bonuses are compensation for prepetition services that were

paid postpetition and, therefore, they are included in the estate under § 541(a)(6) in

their entirety, and cannot be excluded from the estate as earnings for postpetition

services of the Debtor. However, for § 541(a)(6) to apply, there must exist property

of the estate in the first instance (i.e., the bonus payments must have been proceeds

of something that was property of the estate). Because the Debtor had no interest in

the Excellence Award and the GDP program payment on the petition date, the money

she received from IBM postpetition under these programs would not come into the

estate under § 541(a)(6), and it is of no consequence whether they would be excluded

as earnings from services performed by the Debtor postpetition under that section. 

We are not bound by the Booth decision and, because that case is 9

factually distinguishable, we do not opine regarding its holding. However, to the

extent Booth could be construed to treat the IBM bonuses as property of the Debtor’s

estate, we disagree with it.

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Under § 541(a)(7), property ofthe estate includes “(7) [a]ny interest in property

that the estate acquires after the commencement of the case.” Whether the estate

acquired an interest in the award payments begs the question in this appeal; whether

the award payments were property of the estate. And the Trustee has not shown how

the estate acquired an interest in such funds. See Vote, 276 F.3d 1027 (trustee could

not show how estate acquired an interest in prepetition crop losses for which the

debtor was compensated under legislation enacted postpetition).

II. The bankruptcy court erred by entering judgment against the Debtor.

In light of our determination that the Excellence Award and GDP program

payments were not property of the Debtor’s bankruptcy estate, the Trustee is no

longer the prevailing party and we reverse the bankruptcy court’s decisions under

Bankruptcy Code §§ 727(d)(2), 549 and 550 and Federal Rule of Bankruptcy

Procedure 7054(b).

Section 727(d)(2) provides, in pertinent part, that a discharge shall be revoked

if “the debtor acquired property that is property of the estate, or became entitled to

acquire property that would be property of the estate, and knowingly and fraudulently

failed to report the acquisition of or entitlement to such property, or to deliver or

surrender such property to the trustee.” 11 U.S.C. § 727(d)(2) (emphasis added). 

10

Section 549(a) (the subsection upon which the bankruptcy court relied in its Findings

and Order) pertains to the trustee’s avoidance of, “a transfer of property of the estate

. . . .” 11 U.S.C. § 549(a) (emphasis added). Sections 727(d)(2) and 549(a) do not

apply because the IBM payments were not property ofthe Debtor’s bankruptcy estate. 

Likewise, § 550 allows recovery for the estate’s benefit of property transferred or its

value “to the extent that a transfer is avoided under section . . . 549. . .” There was

no transfer under § 549, so § 550 does not apply. 

It is noteworthy that the Debtor could have avoided the § 727(d)(2)

10

lawsuit simply by disclosing on her bankruptcy filings the possibility that she might

receive payments from IBM.

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Federal Rule of Bankruptcy Procedure 7054(b) states that in certain instances

“[t]he court may allow costs to the prevailing party. . . .” Fed. R. Bankr. P. 7054(b)

(emphasis added). The Trustee is no longer the prevailing party and, therefore, the

award of costs under Rule 7054(b) is not appropriate. 

CONCLUSION

The decision of the bankruptcy court is REVERSED.

 

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