In re Christensen
PUBLISHED
Former chapter 7 trustee and his firm filed applications for compensation in two cases after they were converted to chapter 13. The applications sought fees and costs incurred in furtherance of sales of the debtors’ homes, which were encumbered by substantial federal tax liens. The trustee had reached stipulations with the IRS whereby a $10,000 carve-out would go to each estate from proceeds that otherwise would have gone to the IRS. The Court disallowed the fee applications in their entirety, concluding that the services therein were not necessary to the administration of the case and were not reasonably likely to benefit the estate. The Court held that the sales could not go forward unless the debtors’ homestead exemptions were paid in full. The trustee had objected to the exemptions because there was no equity in the property, but the Court concluded that was not a valid basis to disallow a homestead exemption. The Court also held that the asserted basis for the sales—that the carve-outs would be distributed to unsecured creditors—could not occur because the debtors were entitled to exempt the carve-outs as proceeds from the sales of their homes. Because the sales would not have provided a benefit to unsecured creditors, the Court held that the services performed in furtherance of those sales were not compensable under § 330(a).