United States Bankruptcy
Court,D. Arizona.
In re Sandra and Samuel SAWYER, Debtors.
Bankruptcy No. 04-01279-PHX-SSC.
Adversary No. 04-00838.
March 30, 2005.
Background: Chapter 7 trustee moved to compel turnover of nonexempt balance in
debtors' checking account on date that they filed for bankruptcy.
2Holding: The Bankruptcy Court, Sarah Sharer Curley, Chief Judge, held that,
once trustee established balance in debtors' checking account on date they filed
for bankruptcy, trustee would be entitled to turnover of nonexempt portion of
such funds, with no reduction for checks which debtors had written prepetition,
but which had not cleared account as of commencement of bankruptcy case.
So ordered.
*116 Barton L. Baker, Yuma, AZ, for Debtors.
MEMORANDUM DECISION
SARAH SHARER CURLEY, Chief Judge.
I. Preliminary Statement
On May 18, 2004, Jill Ford, the Chapter 7 Trustee in this case, filed a Motion
to Compel Turnover by the Debtors of Estate Property. The Debtors, acting pro
se, filed an initial pleading objecting to the relief requested. Because of the
unique issues presented by the Trustee, the Court set up a further briefing
schedule and conducted several hearings on the matter. The Court has now set
forth its decision on the matter. This constitutes the Court's findings of fact
and conclusions of law pursuant to Fed.R.Bankr.P. 7052. This is a core
proceeding over which this Court has jurisdiction. 28 U.S.C. § § 1334 and 157.
(West 2004)
*117 II. Factual Discussion
The Debtors filed a voluntary Chapter 7 petition under the Bankruptcy Code on
January 27, 2004.FN1 At the time that they filed their petition, they maintained
an account at Wells Fargo Bank Arizona, N.A. (“Wells Fargo”). At the time of
oral argument on the Trustee's Motion, the Trustee presented a chart, which the
Debtors did not contest, but which was not admitted as an exhibit, which
reflected the Debtors' having written certain checks pre-petition which cleared
the Wells Fargo Account post-petition. The Trustee's counsel was unclear whether
the checks had been mailed pre-petition or post-petition, but stated that it did
not matter. The Debtors asserted at the time of oral argument that Ms. Sawyer
had been ill, and when she had received certain income pre-petition, she wrote
the checks and sent them by mail. It was the Debtors' position that they had
defrauded no one and had simply written and sent the checks pre-petition in the
ordinary course.
FN1. All references in this Decision are to the Bankruptcy Reform Act of 1978,
as amended, unless otherwise stated. 11 U.S.C. § § 101-1330.
The Trustee also presented, but did not admit, the check register of the Debtors
for the time period from January 20, 2004 through February 2, 2004 (“Register”).
The Debtors did not dispute that the Register was a portion of their check
register. The Register reflects that the Debtors had a balance on hand of
$1,057.62 on or about January 20, 2004. One or both of the Debtors apparently
wrote a number of checks in the Register until January 22, 2004, when the
Register reflected a balance on hand of $9.16. On that date, in the margin,
there was a notation that subsequent checks “would be mailed after the deposit.”
A number of checks were set forth in the Register after that date with the
balances in parentheses. A series of deposits were reflected in the Register
around January 26, 2004. One or both of the Debtors continued to write checks,
as reflected in the Register, until the balance of funds was reduced to zero.
Finally, the Trustee also presented, without objection, Page 3 from the Debtors'
Wells Fargo bank account statement for the period January 24, 2004 through
February 23, 2004 (“Bank Statement”). The Bank Statement set forth a number of
checks, the “date” of the checks, and the amount of each check. The aggregate
amount of all checks that were reflected on Page 3 was the sum of $8,712.70. The
Bank Statement also reflected a number of “Other Withdrawals” by the Debtors,
such a “Paypal Transfers,” direct debits by various merchants, and a number of
“check card” purchases. It is unclear whether all of the “Other Withdrawals”
have been shown, and there is no aggregate balance for these other transactions.
The Trustee's Memorandum of Law also stated that the Trustee was seeking the
turnover by the Debtors of the net sum of $5,082.34, which was the alleged
non-exempt portion of the funds on deposit in the Debtors' account. The Trustee
was willing to allow the Debtors an exemption of $300, as provided under Arizona
law, for the funds in the account on the date of the commencement of Debtors'
case, but the net amount of $5,082.34 was to be turned over to the Trustee for
administration.
The Trustee did not call anyone from Wells Fargo to testify as to the Account,
did not present the complete Bank Statement, and presented only the Bank
Statement concerning when the various checks written by the Debtors on their
Account actually cleared the Wells Fargo Account. The Debtors did not present
any evidence in support of their position.
*118 The Court's review of the partial records presented does provide some
information that has not been explained. For instance, the Debtors appear to
have kept a meticulous record of their transactions in their Register. It
appears that around January 20, 2004, the Debtors had collected funds in their
Wells Fargo Account in the amount of $1,057.62. The Debtors proceeded to write a
number checks or to have direct debits by merchants to their account, in the
ordinary course, until January 22, 2004, when they had only $9.16, according to
their records, in the Wells Fargo Account. The Debtors' Register reflects that
the Debtors then recorded a number of checks being written, reflecting a
negative balance on their check register, with a notation to “mail after
deposit.” The Debtors' Register then reflects that on January 26, 2004, the
Debtors made four separate deposits into the Wells Fargo Account; that is, the
amounts of $1,142.67, $169.30, $2,500, and $1,100.FN2 Once the deposits were
made, the Debtors reflected positive balances in their Register. They continued
to write checks on January 26 and January 27, 2004, the date that they filed
their bankruptcy petition. They made another deposit, according to the Register,
on January 29, 2004, in the amount of $95.68, and they continued to write checks
on January 31 and February 2, 2004 until they once again had a negative balance.
FN2. The Debtors' Schedules filed with the Court reflect that at the time of the
filing, both Debtors were unemployed. However, the Debtors did state at oral
argument that they received deposits pre-petition and shortly after the petition
was filed. It is unclear to the Court as to whether the deposits were from the
operation of a business. See Docket Entry No. 8, Debtors' Statements, Schedules
I and J thereto.
Page 3 of the Debtors' Bank Statement reflects numerous checks written from
January 26, 2004, through February 23, 2004, in the aggregate amount of
$8,712.70. The Page also reflects numerous other withdrawals from the Account
through the mechanism of direct debits by merchants or a similar method of
payment.FN3 No deposits are reflected on this Page.
FN3. The Bank Statement also reflects a transfer through “Paypal,” a service
which apparently allows the Debtors to use funds from their Account to be
transferred immediately to the account of the merchant or individual which also
subscribes to the service. The Debtors also purchased a series of “check cards.”
There is nothing in the record to reflect that the Debtors were acting in bad
faith or with fraudulent intent. They simply seemed to be depositing funds,
allowing debits from their Account by merchants, and writing checks in the
ordinary course.
III. Issue Presented
Whether the Trustee may require the Debtors to turn over the net sum of
$5,082.34 pursuant to Section 542 of the Bankruptcy Code.FN4
FN4. The Trustee also requested relief under Section 549 of the Bankruptcy Code.
Since the Trustee is entitled to the relief requested under Section 542 of the
Code, provided that certain evidentiary issues are resolved, the Court need not
address the distinct factual and legal issues that would be raised under Section
549.
IV. Discussion
A. The Evidentiary Requirement
[1] As the movant, the Trustee carries the burden of proof on her Motion for
Turnover. To the extent that the record is incomplete or does not address
certain evidentiary issues, the Court must hold the Trustee responsible.
[2] The Court cannot conclude that the net sum of $5,082.34 should be turned
over *119 by the Debtors. The Trustee has presented some information, which has
not been contested by the Debtors, as to what the collected funds were in the
Debtors' Wells Fargo Account on the date that they filed their bankruptcy
petition. However, if the Court reviews the Trustee's chart as to, for instance,
Check No. 2367, the Trustee asserts that it was dated January 22, 2004 and that
it cleared the Wells Fargo Account on February 2, 2004. If the Court reviews
Page 3 of the Bank Statement, it reflects withdrawals by check numbers and has
under the heading “Date,” the notation “2/2.” The Trustee apparently wants the
Court to surmise that Check No. 2367 was honored by Wells Fargo on February 2,
2004, but there is certainly no evidentiary support, from a bank officer or
other appropriate witness with personal knowledge, for that conclusion.
Moreover, the Trustee did not call the Debtors to testify before the Court on
these points. The gap in the evidentiary support is true as to the other
transactions that the Trustee questions. Although the Debtors did not
necessarily dispute when the various checks were honored by Wells Fargo, the
Court was presented with an incomplete record as to what transpired. Based upon
the Trustee's failure to present sufficient evidence in support of the specific
relief requested, the Court must set a further hearing on this matter. However,
the Court recognizes that once these evidentiary issues are addressed, the
Trustee will be entitled to a turnover of the Debtor's collected funds in their
Wells Fargo account on the date that they filed their bankruptcy petition.
B. The Overlay of Federal and State Law
The Debtors represented, at the time that they filed their petition, that they
were unemployed. However, at oral argument, they related that they had
previously owned and operated a construction company. Ms. Sawyer also described
that as she received “commissions,” they were deposited into the Account at
Wells Fargo. Certainly, since the Debtors resided in Arizona and maintained
their Account in this State, Arizona's law governing commercial transactions
would be applicable, at least in part, to resolving this dispute. See A.R.S. §
47-1102(b)(1) (2004).FN5
FN5. The Uniform Commercial Code supplies and provides guidance at to commercial
transactions. Also see A.R.S. § 47-1103, Comment 1, which states that all
supplemental bodies of law, federal or state, are applicable in commercial
contracts.
In determining the nature of the transactions between the Debtors and Wells
Fargo, the Uniform Commercial Code, as well as the law of contracts-or the
bargain of the parties would be important in any decision of this Court. See
A.R.S. § 47-1201(3) (2004).FN6
FN6. Also see A.R.S. § 47-4103(A), stating that the provisions of the Uniform
Commercial Code may be varied by the agreement of the parties.
Since the Debtors maintained a pre- and post-petition Account at Wells Fargo, a
national banking association, Article 4 and 4A of the Uniform Commercial Code
deal primarily with deposits and their availability. However, Article 3, which
pertains to negotiable instruments, may also be relevant to any inquiry. If
there is a conflict between the Articles, Article 4 controls over Article 3. See
U.C.C. § 4-102(a) (2004). Articles 4, 4A, and 3 have been adopted in Arizona.
See A.R.S. § 47-3101 and § 47-4101 et. seq (2004).
Title 12 of the United States Code also governs the relationship of the banking
institution with the depositor and other parties. State law provisions are
preserved*120 and may resolve a dispute before the Court, so long as they are
not inconsistent with federal law. Essex Construction Corporation v. Industrial
Bank of Washington, Inc., 913 F.Supp. 416, 418 (D.Md.1995).
Under Article 4 of the Uniform Commercial Code, when the Debtors deposited their
funds with Wells Fargo, Wells Fargo made a concomitant promise to return those
funds to the Debtors upon demand. In essence, the deposit account became a
liability of the Bank. As deposits were placed in the Debtors' Account, Wells
Fargo was required, by federal law, to provide prompt access to the Debtors'
valid funds.FN7 However, federal law did not require that Wells Fargo assume
liability for “bad checks” given to depositors such as the Debtors. Id. at 418.
Wells Fargo was permitted to provide the Debtors with a provisional credit or
“settlement” for any deposit made by the Debtors to their account. See U.C.C. §
4-201(a); A.R.S. § 47-4201(A) (2004). This provisional credit or settlement
would not have violated federal law FN8 and would have initially increased the
balance in the Debtor's Account. In turn, the Debtors' creditors, after receipt
of the Debtors' checks would have placed those checks in their respective
accounts, receiving a provisional credit and placing the check in the Federal
Reserve System for collection. The Debtors' Bank would be processing the checks
as the “payor bank,” and the creditors' banks would have been the “collecting”
banks. See U.C.C. § 4-105, Subsections 3 and 5; A.R.S. § 47-4105 (2004). The
Debtors' Bank must determine whether to reject any check presented to it for
payment by midnight on the day that it receives it for collection. See U.C.C. §
4-302(a); A.R.S. § 47-4302(A)(1) (2004). In turn, the collecting banks, or those
acting on behalf of the creditors, would retain the right to revoke or charge
back the funds that were provisionally credited to a customer's or creditor's
account until the collecting banks' settlement with the payor bank became final.
FN7. The Expedited Funds Availability Act, 12 U.S.C. § § 4001, et seq., requires
that depository banks provide, pursuant to specific time periods, depository
funds available for withdrawal.
FN8. 12 U.S.C. § 4006(c)(2).
The Debtors paid their creditors through a variety of methods. One of those
methods was the utilization of a personal check. If we review the definition of
a negotiable instrument under Uniform Code Section 3-104 and/or Arizona Revised
Statute Section 47-3104, it is clear that the checks utilized by the Debtors
were negotiable instruments.FN9 Of importance to our analysis is the fact that a
negotiable instrument includes an “unconditional promise to pay.” In this case,
the Debtors presented checks to their creditors with such an unconditional
promise to pay.
FN9. Section 3-104 and A.R.S. § 47-3104, outline the requirements of a
negotiable instrument as: “an unconditional promise or order to pay a fixed
amount of money, with or without interest or other charges described in the
promise or order, if it: (1) is payable to bearer or to order at the time it is
issued or first comes into possession of a holder; (2) is payable on demand or
at a definite time; and (3) does not state any other undertaking or instruction
by the person promising or ordering payment to do any act in addition to the
payment of money, but the promise or order may contain (i) an undertaking or
power to give, maintain, or protect collateral to secure payment, (ii) an
authorization or power to the holder to confess judgment or realize on or
dispose of collateral, or (iii) a waiver of the benefit of any law intended for
the advantage or protection of an obligor.” U.C.C. § 3-104 (2004); A.R.S. §
47-3104 (2004).
*121 As noted previously, Article 4 of the Uniform Commercial Code controls over
Article 3 to the extent that there is any inconsistency. Therefore, the Debtors'
unconditional promise to pay, as set forth on the face of their checks, was
vitiated by the requirement that the collecting banks need only give provisional
credit to their depositors, the Debtors' creditors, until the payment from the
Debtors' payor bank became final.
Given this overview, on the date that the Debtors' filed their petition, the
Court concludes that the Debtors still controlled the funds in their Account as
to which they had already written numerous checks. The creditors' banks would
have been providing the creditors only provisional credits for any deposits,
waiting for the Debtors' payor bank to advise them whether there were sufficient
funds on hand to make the payment final as to the Debtors' checks.
C. The Bankruptcy Code Provisions
In analyzing § 362(b)(11), which states that the automatic stay does not apply
to the presentment of a negotiable instrument, such as a check, and the giving
of notice of dishonor of such instrument,FN10 and 11 U.S.C. § 542(c), which
provides that an entity, such as a financial institution, which has neither
actual notice nor knowledge of the commencement of a debtor's case, may transfer
property of the estate or pay a “debt owing to the debtor, in good faith” to a
person or entity other than the trustee as if the debtor's case had never been
filed,FN11 the Court discerns a Congressional policy that certain routine
transactions in commerce, whether pertaining to an individual debtor or a large
corporate entity as a debtor, will not be disrupted, particularly if the entity
engaged in the potential transfer of bankruptcy estate property has no actual
notice or knowledge of the debtor's having commenced a bankruptcy proceeding.
This protection, however, appears to apply only to those third parties which
engage in transactions with the debtor.
FN10. 11 U.S.C. § 362(b)(11) provides, in pertinent part:
The filing of a petition under section 301, 302, or 303 of this title, or of an
application under section 5(a)(3) of the Securities Investor Protection Act of
1970, does not operate as a stay-
....
(11) under subsection (a) of this section, of the presentment of a negotiable
instrument and the giving of notice of and protesting dishonor of such an
instrument.
FN11. 11 U.S.C. § 542(c) states, in pertinent part:
Except as provided in section 362(a)(7) of this title, an entity that has
neither actual notice nor actual knowledge of the commencement of the case
concerning the debtor may transfer property of the estate, or pay a debt owing
to the debtor, in good faith and other than in the manner specified in
subsection (d) of this section, to an entity other than the trustee, with the
same effect as to the entity making such transfer or payment as if the case
under this title concerning the debtor had not been commenced.
[3] Indeed, a review of Section 541 provides that the collected funds in the
Debtor's account became property of the bankruptcy estate either pursuant to
Section 541(a)(1) or (a)(2). Section 541(a)(1) provides “the commencement of a
case under section 301, 302, or 303 of this title creates an estate. Such estate
is comprised of all the following property, wherever located and by whomever
held (1) except as provided in subsections (b) and (c)(2) of this section, all
legal or equitable interests of the debtor in property as of the commencement of
the case.” The scope of this Subsection is broad. Cusano v. Klein, 264 F.3d 936
(9th Cir.2001); *122Chappel v. Proctor, 189 B.R. 489 (9th Cir.BAP 1995); In re
Morris, 154 B.R. 556 (Bankr.D.Ariz.1993).FN12
FN12. The Legislative History for this Subsection also states this provision
includes property “recovered by the trustee under section 542 of proposed title
11, if the property recovered was merely out of the possession of the debtor,
yet remained ‘property of the debtor’.” H.R. 595, 95th Cong. (1977); S.Rep No.
989, 95th Cong. (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5868, 5963,
6323.
Subsection 541(a)(2) may provide a separate basis for the Wells Fargo Account to
become property of the estate, since that Subsection refers to community
property in which the debtor and debtor's spouse have an interest, yet the
debtor has “sole, equal, or joint management and control” of the Account. FN13
In this case, both Debtors filed their bankruptcy petition, but at least at oral
argument, Ms. Sawyer seemed to have the primary control over the Wells Fargo
Account. The fact that she had such control, however, would not preclude the
Account from becoming property of the estate.
FN13. Section 541(a)(2) provides in its entirety:
The commencement of a case under section 301, 302, or 303 of this title creates
an estate. Such estate is comprised of all the following property, wherever
located and by whomever held:
.....
(2) All interests of the debtor and the debtor's spouse in community property as
of the commencement of the case that is-
(A) under the sole, equal, or joint management and control of the debtor; or
(B) liable for an allowable claim against the debtor, or for both an allowable
claim against the debtor and an allowable claim against the debtor's spouse, to
the extent that such interest is so liable.
[4][5][6] As to whether the Debtors must turnover any funds to the Trustee,
Section 542(a) states in relevant part:
[A]n entity ... in possession, custody, or control, during the case, of property
that the trustee may use, sell, or lease under section 363 of this title, or
that the debtor may exempt under section 522 of this title, shall deliver to the
trustee such property or the value of such property ...
The Court's review of the term “entity” certainly encompasses the Debtors. 11
U.S.C. § 101, subsection 15 and 41 (2004). As noted previously, either Section
541(a)(1) or (a)(2)(A) would incorporate the Debtors' interest in the Wells
Fargo Account as property of the estate.FN14 However, to succeed under Section
542, the Trustee must show that the Debtors had “possession, custody, or
control” of the Account on the date that they filed their petition. The Trustee
argues that the Debtors had the sum of $5,082.34 in net collected funds in their
Wells Fargo Account on the date that they filed, not subject to any claim of
exemption, and that the Debtors must turn over all of these funds, although the
Debtors had issued checks on the Account which cleared Wells Fargo
post-petition. The Trustee believes that because the Debtors could have placed
“stop payment” orders on all of the checks, they had the requisite possession or
control for purposes of the turnover proceeding.
FN14. The Debtors do not dispute that their funds were placed into the Wells
Fargo Account and that at least Ms. Sawyer had management or control over the
funds deposited. Since the Debtors are married, there is a presumption under
Arizona law that the funds placed into the Account constituted the community
property of the Debtors. Carroll v. Lee, 148 Ariz. 10, 712 P.2d 923 (Ariz.1986);
Blazek v. Superior Court In and For County of Maricopa, 177 Ariz. 535, 539, 869
P.2d 509, 513 (Ariz.App. Div. 1 1994). Thus, Section 541(a)(2)(A) appears
applicable to the account.
The two only reported decisions which appear to address squarely the issues
presented by the Trustee herein come to far different results. Neither decision
is from *123 a court in the Ninth Circuit. In the decision of In re Figueira,
163 B.R. 192 (Bankr.D.Kan.1993), the trustee filed a motion for the turnover of
funds in the debtor's bank account as of the date of the filing of the
bankruptcy petition. The debtor had listed the bank account on his schedules,
but had listed a balance of zero in the account. Upon investigation, the trustee
discovered that the debtor had a balance of $1,055.13 on hand, if the trustee
included those checks which had been written pre-petition by the debtor, but had
been honored post-petition by the debtor's bank. The trustee pursued the debtor
because none of the creditors received more than an aggregate amount of $600 in
payment, so the trustee would not have succeeded on any claim under Section
547.FN15
FN15. 11 U.S.C. § 547(c)(8) specifically prohibits the trustee from avoiding a
transfer if an individual debtor files the bankruptcy petition, the debts are
primarily consumer debts, and the aggregate of all property affected by such a
transfer to a creditor is less than $600.
The Court analyzed the nature of the debtor's interest in the account and
determined that the debtor was simply owed a debt by his financial institution
and that there was no requirement that the debtor assist the trustee with the
collection of a debt owed to the estate. Id. at 194. The debtor need only
surrender the property in his possession, and the account did not qualify as
such property. Id. The Court also stated that Fed.R.Bankr.P.2015(a)(4) required
the trustee to provide notice to the financial institutions of the filing of the
debtor's case, which supported the Court's conclusion that the trustee was
required to secure the account at the time of the filing of the case and pursue
the bank or creditor which received property of the estate.
This Court must disagree with this analysis. Although this Court has an enormous
amount of sympathy for the pro se Debtors in this case who apparently acted in
good faith, the Court cannot disregard those provisions of federal and state law
which provide, at a minimum, (1) that the Debtors' interest in the Wells Fargo
Account became property of the bankruptcy estate when they filed their petition,
and (2) that although the Debtors may not have had technical custody of those
funds as to which they had written checks to their creditors, they did have
control over the funds, because Wells Fargo had not authorized, as a payor bank,
any final payment on the checks that the Debtors had sent out by mail. Even the
direct payment to merchants or similar transactions had an apparent delay before
they became final. However, the Trustee must clarify exactly what were the
collected funds in the Debtors' Account when they filed their petition through
further evidentiary support. Section 541 offers no exception for the predicament
of these Debtors, although Congress clearly could have carved out an exception
as to what constituted property of the estate. Finally, Section 542 is overly
broad, so that there is no basis for this Court to exclude the Debtors from the
operation of its turnover provisions. Indeed Fed.Bankr.R.P. 7001 specifically
permits the trustee to request the turnover of property over which the debtor
has possession or control by simple motion.
The other reported decision supports the conclusion that this Court has reached.
In the decision of In re Maurer, 140 B.R. 744 (D.Minn.1992), the District Court,
on appeal, affirmed the conclusion of the bankruptcy court that the debtor must
turn over the funds that were in his account on the date that he filed even
though the debtor had delivered three checks to his creditors pre-petition,
which were not honored by the debtor's bank until after *124 the debtor had
filed his petition. Upon a review of the debtor's account, the trustee
discovered that the debtor had $1,083.11 on deposit when he filed his petition.
Subsequently, three checks were honored post-petition by the debtor's bank,
leaving the debtor with a balance of $43.21. Id. at 745. The Appellate Court
first analyzed the Supreme Court decision of Barnhill v. Johnson, 503 U.S. 393,
112 S.Ct. 1386, 1390, 118 L.Ed.2d 39 (1992), wherein the Supreme Court
determined that, at least for purposes of Section 547(b), the transfer occurred
only when the debtor directed his bank to honor the check, and the bank, in
fact, did so. Id. at 745. Acknowledging that the Eighth Circuit had not yet
taken a position on the issue under Section 542, and that the Courts had
different interpretations as to whether the date of the delivery of the check or
the date that the check was honored should control, depending on the Subsection
or Section being analyzed, FN16 the Court in Maurer determined that the policy
issue required that there be an equitable distribution to creditors, and that
policy was best effectuated by determining that the funds remained in the estate
until the debtor's bank honored the check. Id. at 746. Such an analysis makes
sense in that until the checks were honored by the debtor's bank, the debtor
still had the opportunity to close the account or to stop payment on the checks.
FN16. For purposes of Section 547(c), the Court noted that the Eighth Circuit
had relied on the date of the delivery of the check as being the operative date,
but had determined that the date of payment was the applicable date for purposes
of Section 547(b). Id. at 746.
The Court concludes that although it is unfortunate that there are now different
standards as to when a transfer occurs when analyzing what is an avoidable
transfer, the current case law requires such a result.
V. Conclusion
Although it concerns this Court that this Decision now requires a debtor in
Arizona to wait until all checks have been honored, or all direct debits to
his/her account have been completed, before filing a petition, or risk the
trustee requiring a turnover of the collected funds that are on deposit in the
debtor's account at the time of filing, the Court sees no alternative to such a
requirement. Unfortunately, many debtors do not have the luxury to wait while
all checks are being honored. In essence, the debtor is now required to use
his/her debit card before filing, note the collected funds in the account, and
then place that amount on the debtor's schedules.
Because the Trustee did not fully support the collected funds in the Debtors'
Account at the time that they filed their bankruptcy petition, the Court will
set a further hearing on this matter by separate notice. The Court will execute
a separate order as well, incorporating this memorandum decision.
Bkrtcy.D.Ariz.,2005.
In re Sawyer
324 B.R. 115, 57 UCC Rep.Serv.2d 560, 54 Collier Bankr.Cas.2d 282
END OF DOCUMENT