Chapter 27 - § 27.5 • TURNOVER

• Jurisdiction: Colorado

§ 27.5 • TURNOVER

An entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under 11 U.S.C. § 363 or that the debtor may exempt under § 522, must account for and deliver the property or its value to the trustee, unless the property is of inconsequential value or benefit to the estate.¹¹⁸ 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 in good faith to an entity other than the trustee, with the same effect as to the entity making the transfer as if the case concerning the debtor had not been commenced.¹¹⁹

A custodian with knowledge of the commencement of a case concerning the debtor may not make any disbursement from, or take any action in the administration of, property of the debtor, the proceeds, products, offspring, rents, or profits of such property, or property of the estate, in the possession, custody, or control of the custodian, except such action as is necessary to preserve the property.¹²⁰ A custodian must deliver to the trustee any property of the debtor held by or transferred to the custodian, or proceeds, product, offspring, rents, or profits of the property, that is in the custodian's possession, custody, or control on the date that the custodian acquired knowledge of the commencement of the case.¹²¹ The bankruptcy court cannot revest possession and control in a custodian once the turnover has been made.¹²²

If the debtor does not have a right to possess or use property at the commencement of the case, the trustee cannot acquire such rights through a turnover action.¹²³

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Notes:

^[118] 11 U.S.C. § 542(a).

^[119] 11 U.S.C. § 542(c).

^[120] 11 U.S.C. § 543(a).

^[121] 11 U.S.C. § 543(b)(1).

^[122] In re Watkins, 63 B.R. 46 (Bankr. D. Colo. 1986).

^[123] Bernstein v....