NACBA has filed an amicus brief in the case of In re Henson, No. 11-16019 (9th Cir.), seeking a finding by the Ninth Circuit that the trustee may not use his turnover power under section 542 to require a debtor to pay into the estate funds that are no longer in the debtor’s possession. In this case, the debtor had written a check prior to bankruptcy which was not cashed until after the bankruptcy filing. Instead of using his avoidance power under section 549 to recover the funds from the payee, the trustee sought to obtain the money from the debtor, thereby exposing the debtor to double payment and allowing the payee to receive more than he would have been entitled to through bankruptcy distribution. Read More
Tag Archive: Turnover
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NACBA Argues that Possession Necessary for Turnover Obligation
Posted by NCBRC - December 17th, 2012
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Turnover Amicus Brief
Posted by NCBRC - September 11th, 2012
NACBA has filed an amicus brief on the issue of whether a creditor must return collateral that was repossessed prior to bankruptcy once the creditor learns of the bankruptcy filing. Weber v. SEFCU, No. 12-1632 (2d Cir.). NACBA argues that section 542(a) imposes an affirmative duty on a creditor in possession of collateral to turn it over to the bankruptcy estate and that failure to do so is an unlawful “exercise of control over the property” and a violation of the automatic stay under section 362(a) meriting sanctions.
Thanks to Ray DiGuiseppe for writing NACBA’s brief.
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Trustee Has Power to Require Turnover of Property Securing Tax Lien
Posted by NCBRC - May 1st, 2012
The District Court for the Northern District of West Virginia found that the trustee had the power under section 724(b) to require turnover of debtor’s 2002 Lincoln LS for the purpose of selling it to pay a substantial portion of the tax debt even though the tax lienholder had not sought relief from stay for that purpose. Sheehan v. Posin, No. 11-160 (N.D. W.Va., April 23, 2012). In reversing the decision of the bankruptcy court, the district court relied on the plain language of section 724(b) concluding that the trustee’s power to require turnover under section 542 for sale of property securing a tax lien was not contingent upon the lienholder taking the affirmative step of seeking relief from stay.
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No Requirement upon Conversion to Chapter 7 to Turn Over Tax Refund
Posted by NCBRC - April 2nd, 2012
The BAP for the Ninth Circuit found that a pre-petition tax refund which was obtained and spent by chapter 13 debtor post-petition but prior to confirmation of chapter 13 plan, was not subject to turnover upon conversion to chapter 7. Warfield v. Salazar (In re Salazar), No. 11-1551 (B.A.P. 9th Cir. March 14, 2012), The court found that the case turned on interpretation of section 348(f)(1)(A) which provides that upon conversion from chapter 13 to chapter 7 the estate consists of property in the possession or control of debtor at the date of conversion. Noting that section 348(f)(1)(A) creates an anomaly whereby a debtor who remains in chapter 13 would have had to have included the refund in the plan, and a debtor who had filed originally in chapter 7 would have been required to turn over the refund, the court found that the plain language of that section pinpoints the date of conversion as the relevant point. Applying rules of statutory construction, the court found that this result was not absurd and that, in the absence of bad faith, the debtors therefore were not required to turn over the tax refund.
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Thank you to the following organizations without whose support our work would not be possible.
American College of Bankruptcy
The American College of Bankruptcy is an honorary public service association of bankruptcy and insolvency professionals who are invited to join as Fellows based on a proven record of the highest standards of professionalism plus service to the profession and their communities. Together with its affiliated Foundation, the College is the largest financial supporter of bankruptcy and insolvency-related pro bono legal service programs in the United States.NACBA
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The only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA has more than 3,000 members located in all 50 states and Puerto Rico.