Turnover

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Post-Petition Lawsuit Not Property of Estate

Where the debtor had not suffered any injury from her hip replacement until post-discharge, the claim against the medical device provider was not property of the bankruptcy estate even though the hip replacement took place pre-petition. Sikirica v. Harber (In re Harber), 2016 Bankr. LEXIS 2168, No. 14-20155 (Bankr. W.D. Pa. May 31, 2016).

Elizabeth Harber underwent two hip replacement surgeries using implants produced by DePuy Orthopaedics. Three years later, she received notice that some of the implants were problematic, and she was listed among the plaintiffs in a class action lawsuit against DePuy. Three years later, she and her husband, Brent Harber, filed for Chapter 7 bankruptcy. They listed the lawsuit in their schedules as a contingent, unliquidated claim with a value of $0. At that time, Ms. Harber had suffered no injury as a result of the implants. The Harbers’ bankruptcy case was closed with the potential claim against DePuy excepted from abandonment. Ms. Harber then discovered that metal had entered her bloodstream due to the implants, and she was advised to have the hip replacement revised. Nonetheless, Ms. Harber dismissed her civil suit without prejudice as a “non-revised” plaintiff. She had the hip revision shortly thereafter. The Harbers’ bankruptcy attorney informed the court of a potential civil case against DePuy. The bankruptcy case was reopened, and the trustee filed a turnover motion seeking to require the Harbers to contribute any settlement they might receive to the bankruptcy estate. The Harbers objected, arguing that any settlement would not be property of the estate because Ms. Harber did not suffer any injury until after the bankruptcy case was closed. [Read more…] about Post-Petition Lawsuit Not Property of Estate

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Charitable Contribution in Excess of 15% Avoidable in its Entirety

In a sharply circumscribed opinion, the Tenth Circuit found that the trustee could avoid in their entirety charitable contributions over 15% of the debtors’ gross annual income. Wadsworth v. The Word of Life Christian Center (In re McGough), No. 12-1142 (Dec. 16, 2013). [Read more…] about Charitable Contribution in Excess of 15% Avoidable in its Entirety

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Absolute Assignment of Rents Precludes Turnover

This case centered on whether rent collected by the debtors becomes part of the bankruptcy estate even though the right to collect the rents had been absolutely assigned to their lender PHH Mortgage (“PHH” or “assignee”). Relying on In re Jason Realty, 59 F.3d 423 (3d Cir. 1995), the bankruptcy court found that PHH, as assignee, was the owner of the right to collect rents and, therefore, the debtor had no ownership interest to augment the bankruptcy estate. The district court affirmed. In re Cordova, No. 13-810 (D. N.J. Oct. 22, 2013). [Read more…] about Absolute Assignment of Rents Precludes Turnover

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Creditor Must Return Repossessed Vehicle upon Bankruptcy Filing

The Second Circuit upheld sanctions against vehicle loan creditor SEFCU for refusing to return the debtor’s repossessed vehicle without a court order and adequate protection. Weber v. SEFCU, No. 12-1632 (May 8, 2013). SEFCU had lawfully repossessed the debtor’s pick-up truck under the loan agreement, but when the debtor filed for bankruptcy, SEFCU refused to return the vehicle. The bankruptcy court determined that SEFCU’s actions did not violate the automatic stay. The district court reversed. Weber v. SEFCU, 477 B.R. 308, 311 (N.D.N.Y. 2012). [Read more…] about Creditor Must Return Repossessed Vehicle upon Bankruptcy Filing

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NACBA Argues that Possession Necessary for Turnover Obligation

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…] about NACBA Argues that Possession Necessary for Turnover Obligation

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Turnover Amicus Brief

NACBA has filed an amicus brief on the issue of whether a creditor must return collateral that was repossessed before 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.

Weber NACBA amicus