CAN TRUSTEE FORCE DEBTOR TO TURNOVER MONEY THAT NO LONGER EXISTS?（ PART 1 ）
楊清泉律師事務所
When debtor filed his Chapter 7 petition, he had $10,000 in his checking account which was used to cover checks issued before bankruptcy was filed. On schedule C, debtor claimed that $1,000 in his checking account was exempt. The trustee demands that debtor deliver the difference between $10,000 and $1,000, or $9,000 to the trustee because only $1,000 of the $10,000 is exempt. Debtor replies that he will not transfer the $9,000 because the funds no longer exist. Debtor insists that the checks issued against the funds cleared after the bankruptcy was filed. Who is correct?
In Re Henson (9th Circuit 1/9/14), debtor had $6,995 in her checking account when she filed for Chapter 7 relief. The money was there for a short period of time because it was used to honor checks that the debtor wrote prepetition. Relying on Section 542(a), the trustee demanded that the debtor deliver this money to him. She responded that she did not have the money and would not comply. The trustee then filed a motion to turnover under Section 542(a) seeking to recover the $6,955 minus the debtor’s $800 exemption. The bankruptcy court denied the trustee’s action against the debtor on the ground that the debtor did not have possession or control of the funds at the time the trustee moved for turnover. The district court affirmed.
Reversing, the 9th Circuit Court of Appeals, stated that with the power granted to the trustee by Section 542(a), “The trustee may seek recovery from entities having ‘possession, custody, or control’ of the property sought, whether the property was in the entity’s possession, custody, or control at the time the motion was filed or at any other point during the pendency of the bankruptcy case.”
The 9th Circuit said two key phrases showed that Section 542(a) allows a turnover motion to be brought at any time during the pendency of the bankruptcy case even if the respondent no longer possesses or has custody or control over the property at the time the motion is filed.
Continue to….
CAN TRUSTEE FORCE DEBTOR TO TURNOVER MONEY THAT NO LONGER EXISTS? （ PART 2 ）
In Re Henson (9th Circuit 1/9/14), debtor had $6,995 in her checking account when she filed for Chapter 7 relief. The money was there for a short period of time because it was used to honor checks that the debtor wrote prepetition. Relying on Section 542(a), the trustee demanded that the debtor deliver this money to him. She responded that she did not have the money and would not comply. The trustee then filed a motion to turnover under Section 542(a) seeking to recover the $6,955 minus the debtor’s $800 exemption. The bankruptcy court denied the trustee’s action against the debtor on the ground that the debtor did not have possession or control of the funds at the time the trustee moved for turnover. The district court affirmed.
Reversing, the 9th Circuit Court of Appeals, stated that with the power granted to the trustee by Section 542(a), “The trustee may seek recovery from entities having ‘possession, custody, or control’ of the property sought, whether the property was in the entity’s possession, custody, or control at the time the motion was filed or at any other point during the pendency of the bankruptcy case.”
The 9th Circuit said two key phrases showed that Section 542(a) allows a turnover motion to be brought at any time during the pendency of the bankruptcy case even if the respondent no longer possesses or has custody or control over the property at the time the motion is filed.
Continue to….
CAN TRUSTEE FORCE DEBTOR TO TURNOVER MONEY THAT NO LONGER EXISTS? （ PART 2 ）
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