filed: February 3, 1993; As Corrected February 8, 1993.
Appeal from the United States District Court for the District of New Jersey. (D.C. Civil Action No. 92-656).
Present: Mansmann and Hutchinson, Circuit Judges, and Bartle, District Judge*fn*
This appeal raises the question whether proceeds of a credit life insurance policy are the property of the estate of a bankrupt debtor which owns the policy, or the property of the creditor beneficiary of the policy.
The facts are not in dispute. Debtor Raymond McAteer purchased a Mitsubishi Pick-Up Truck in 1989 through a retail installment contract which was assigned to First Fidelity Bank, N.A., South Jersey ("FFB"). Under the installment contract Mr. McAteer's total indebtedness amounted to $14,195.40. As security for the loan, Mr. McAteer purchased a credit life and credit disability insurance policy naming FFB as the primary beneficiary and Mr. McAteer's estate as the secondary beneficiary. According to the policy, in case of Mr. McAteer's death, the insurance company would pay to FFB any amount remaining according to the schedule of indebtedness, plus up to two months' arrearage. Conversely, if Mr. McAteer died having prepaid some of the loan, the insurance company would pay the amount actually owed to the bank, and the excess to Mr. McAteer's estate as secondary beneficiary.
On March 28, 1989, Raymond H. McAteer and his wife Helen D. McAteer filed a joint Chapter 13 bankruptcy petition. Under the confirmed plan, FFB's claim, which at that time amounted to $13,722.22 was "crammed down" to the fair market value of its collateral, the Mitsubishi truck, valued at $7,525.00 on the date the debtors' petition was filed, plus 10% of the $6,197.22 unsecured balance of the loan.*fn1 FFB did not object to the plan. On February 5, 1990, after the Chapter 13 plan was confirmed, Mr. McAteer died. The insurance company thereafter paid FFB $11,356.32, the amount due on the date of death, according the schedule of indebtedness, plus two months' arrearage. Helen McAteer moved in the Bankruptcy Court to compel FFB to turn over to the estate the insurance proceeds in excess of the amount due FFB under the confirmed plan. The Bankruptcy Court ordered all proceeds in excess of the allowed secured claim turned over to the debtor's estate. Matter of McAteer, 130 Bankr. 726 (Bankr. D.N.J. 1991). The district court affirmed the bankruptcy court's order. We reverse.
The parties agree that the credit life insurance policy itself is property of the estate under Section 541(a) of the Bankruptcy Code, 11 U.S.C. § 541(a). Under this section, the estate includes:
(1) ... all legal or equitable interests of the debtor in property as of the commencement of the case.
(5) Any interest in property that would have been property of the estate if such interest had been an interest of one of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date--
(C) as a beneficiary of a life insurance policy or of a death benefit plan.
11 U.S.C. § 1306 further defines the property of the estate in Chapter 13 cases:
(a) property of the estate includes, in addition to the property specified in sec. 541 of this title - (1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed or converted to a case under Chapter 7, 11, 12 ...
This Court has held that insurance policies are property of the estate "even though the policy has not matured, has no cash surrender value and is otherwise contingent." Estate of Lellock v. Prudential Ins. Co., 811 F.2d 186, 189 (3d Cir. 1987) (quoting ...