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Trustee Can't Compel Buffalo Debtor to Turn Over Tax Refund in Converted Case: Schick

A debtor cannot be compelled to turn over tax refunds she no longer has, in a Buffalo case where the debtor originally filed Chapter 13, spent the refunds, and then converted to Chapter 7. In re Schick Bankruptcy WDNY (Buffalo) #09-15602 (Judge Bucki; decision July 26, 2011.)

When the case was filed, the debtor had unexempt refunds of $4,105. While in Chapter 13 she made $1,460 in plan payments. When the case was converted to chapter 7, the bankruptcy trustee filed a motion to compel her to turn over the balance of $2,645, even though the funds were long since spent. The judge ruled that, absent bad faith, a debtor cannot be compelled to turnover an asset she no longer had.

Although not cited in the Schickdecision, Rochester Bankruptcy Judge John C. Ninfo ruled the same way in an identical case in 2002 (In re McFadden, Bankruptcy WDNY #00-22684 (Judge Ninfo; decision September 12, 2002.)

As I report on my website, some people file chapter 13 in order to save an asset they would lose to the trustee in Chapter 7.

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