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 the 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 the sale of property securing a tax lien was not contingent upon the lienholder taking the affirmative step of seeking relief from stay.
No Requirement upon Conversion to Chapter 7 to Turn Over Tax Refund
The BAP for the Ninth Circuit found that a pre-petition tax refund, which was obtained and spent by a Chapter 13 debtor post-petition but before confirmation of the 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 were not required to turn over the tax refund.
In re Mwangi, No. 09-1408 (B.A.P. 9th Cir.)
Type: Amicus
Date: April 1, 2010
Description: Whether bank’s administrative hold on debtor’s account violates the automatic stay or turnover provisions.
Result: Reversed. Debtor won.
Mwangi BAP 9th Cir NACBA amicus
Brown v. Pyatt, No. 06-3404 (8th Cir.)
Type: Amicus
Date: January 24, 2007
Description: Whether debtor must reimburse the estate where pre-petition checks are cashed post-petition.
Result: Affirmed. Debtor won. 486 F.3d 423 (8th Cir. 2007)
Pyatt 8th Cir opinion Pyatt NACBA amicus 8th Cir