We currently have a converted Chapter 13 case that is now a Chapter
7. One of the Chapter 7 Bankruptcy Trustee’s is trying to say that a
tax refund that was received and spent while in the Chapter 13 is
property of the converted case. This flies right in the face of
11 U.S.C. Section 348(f)(1)(A), this section of the Bankruptcy Code,
clearly provides that property of the converted estate “shall consist
of property of the estate, as of the date of filing of the petition, that
remains in the possession of or is under the control of the debtor on
on the date of conversion“. Italics added for emphasis.
This seems clear that if the Debtors receive and spend their tax refund
prior to converting their case, the tax refund is no longer in their
possession of under their control and should not be considered
property of the Chapter 7 Bankruptcy Estate.
The Chapter 7 Trustee sees it a different way and is trying to force the
Debtors to turnover their tax refund. I guess we will see what the
bankruptcy judge in Salt Lake City, Utah has to say.