Yesterday, the Ninth Circuit Court of Appeals issued an opinion ruling against a debtor who failed to turn over bank funds to the trustee in her chapter 7 bankruptcy case.
Who is Directly Affected?
Judges in Washington, Oregon, California, Idaho, Nevada, Arizona, and Montana are generally required to follow Ninth Circuit Court of Appeals opinions. For more about stare decisis, click here.
Lesson: Have No Cash On the Day of Filing
On the day Barbara Henson filed bankruptcy, she had over $6,000 in her Bank of America checking account.
By the time her trustee demanded the $6,000 a month later, she had already spent it.
The Court of Appeals ruled that Henson was required to comply with the trustee's demand, even though she didn't actually possess the bank funds on the date the demand was made.
This opinion creates a circuit split with the Eighth Circuit opinion in Brown v. Pyatt (In re Pyatt), 486 F.3d 423, 429 (8th Cir. 2007).
The Court of Appeals was admittedly persuaded by similar conclusions reached by the Bankruptcy Appellate Panel in its Newman v. Schwartzer (In re Newman), 487 B.R. 193, 199–200 (B.A.P. 9th Cir. 2013) opinion, which included panelist Portland Bankruptcy Judge the Honorable Randall Dunn.