The Ninth Circuit Court of Appeals recently issued the opinion, Shapiro v. Henson, which held that a party has a statutory duty to turn over property that it had possession, custody or control of at any time during the bankruptcy case. Prior to filing a voluntary Chapter 7 bankruptcy petition, the debtor had written several checks drawn on a Bank of America checking account with $6,955.19 in it, but the bank did not honor those checks until after the debtor filed her bankruptcy petition. The trustee requested turnover of all the money that was in the account as of the date the petition was filed. The debtor responded that she was no longer in possession of the funds and could not comply. The bankruptcy court ruled in favor of the debtor, stating that she did not have possession or control of the funds at the time the trustee filed the motion for turnover. The district court affirmed. However, the Ninth Circuit Court of Appeals reversed the district court's decision, holding that two key phrases in Section 542 of the Bankruptcy Code supported its ruling: "during the case" and "or the value of such property." The Ninth Circuit found that the phrase "during the case" evidenced that there is no temporal restriction for turnover of property or the filing of a turnover motion. Since a trustee can recover "the value of such property" instead of the property itself, possession is not a prerequisite for a turnover motion. Accordingly, a trustee may seek turnover against a party regardless of whether or not a debtor is in possession of the property in question when a motion for turnover is filed.
Posts tagged "Chapter 7 bankruptcy debtor property"
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