Court Opinion

ID: 8489296
Source: CourtListenerOpinion
Date Created: 2022-11-22 21:39:05.776244+00
Date Added: 2024-06-11T16:50:16.354009
License: Public Domain

LASAROW, Bankruptcy Judge,
dissenting:
All post-petition earnings from the operation of a law practice in a Chapter 11 case should be property of the estate. It should make no difference that all or part of those earnings are due to the post-petition services of an individual Chapter 11 debtor.
I agree that 11 U.S.C. § 541(a)(6), standing alone, would cause the debtor’s post-petition earnings arising from his personal services to be excluded from property of the estate. However, to apply that general rule to this case ignores the conflicting provisions of Chapter 11 and especially 11 U.S.C. § 1108.
It appears that the majority would have ruled differently in this appeal if § 1108 had expressly included those post-petition earnings as property of a Chapter 11 estate as does § 1306(a)(2) for Chapter 13 cases. The majority opinion recognizes that the conflict between § 541(a)(6) and § 1306(a)(2) should be resolved in favor of § 1306(a)(2) for application to Chapter 13 cases. But the majority reasons that the absence of a similar Chapter 11 provision overriding § 541(a)(6) leaves § 541(a)(6) as the applicable statute to the earnings in question.
Although not apparent from the language of the statute, a conflict between § 541(a)(6) and § 1108 is clearly implied. A logical analysis leads to the conclusion that § 1108 provides that the earnings of a debt- or’s business including those derived from his personal services are property of the Chapter 11 estate. As a result of this conflict with § 1108, that portion of § 541(a)(6) concerning post-petition earnings should be inapplicable in Chapter 11 cases for the same reason that a conflict with § 1306(a)(2) renders § 541(a)(6) inapplicable in Chapter 13 cases.
*241The following analysis should show that § 1108 is in direct conflict with § 541(a)(6) concerning post-petition earnings. Section 1108 provides: “Unless the court orders otherwise, the trustee may operate the debtor’s business.” Section 323(a) (11 U.S.C. § 323(a)) provides: “The trustee in a case under this title is the representative of the estate.” It follows that the trustee’s operation of the debtor’s business as the representative of the estate is for the benefit of the estate. Such benefit to the estate would include the earnings of the operation. Therefore all earnings from the operation of the debtor’s business should be included in the property of the estate. The risk of loss from the operation is borne by the estate, and actual losses are charged against the estate by way of administrative claims. It would be incongruous and unfair to creditors to impose upon the estate the risk of loss from the operation of the business while excluding the income from the property of the estate.
The trial judge authorized compensation at $3500 per month payable to the debtor for. his services to the law firm. The rate of compensation is subject to modification in accordance with changes in circumstances as the case proceeds. The debtor does not contend that the rate of compensation is unreasonable, but he argues that all of the earnings of the law practice should be his, free of the jurisdiction of the bankruptcy court.
The debtor asserts that depriving him of the earnings in question subjects him to involuntary servitude in violation of the 13th Amendment of the United States Constitution. That argument fails to consider that the debtor is not compelled to assist in the operation of the law firm under the jurisdiction of the bankruptcy court. He may find other employment or establish a new law firm, thus obtaining a fresh start. However, in doing so he would lose the advantage of continuity of his law practice and would not have the use of pre-petition accounts receivable and other non-exempt business assets for his new enterprise. It is apparent that by choosing to continue to assist in the operation of his law practice under Chapter 11, the debtor is avoiding a partial liquidation of the assets of his law firm, a disruption of his practice, and the impairment of his chances for a successful reorganization. The debtor, having this choice, is not the victim of involuntary servitude.
I would affirm the decision of the trial court.