In re: Rynda, No. 09-41568 EDJ 7 (Bankr. N.D. Calif., June 1, 2011).
The debtor in this case, Carolina Contreras Rynda, filed for Chapter 7 bankruptcy in 2009. At the time, she had the right to collect California State and Federal income tax refunds, but she did not list the rights or the sum to be collected when she filed. She later received two tax refunds amounting to $10,290 after filing for bankruptcy, which she spent. The bankruptcy trustee demanded that she return the money, which she did not or could not do.
The court held that Carolina must hand over the funds to the trustee. Under Bankruptcy Code section 542(a), an individual in possession of property that is part of the estate must be handed over to the trustee.
Carolina argued that she had attempted to settle with the trustee and he had unreasonably refused. Further, she argued that she had no idea the funds would be included in her estate. However, her claims were without any citation of Bankruptcy Code provisions, and had no basis in law. For this reason, the court ordered that she turn over the funds to the court.
This case demonstrates the importance of retaining a qualified bankruptcy attorney. The debtor in this case attempted to reason with the court herself, but did not have any legal basis. Additionally, she clearly planned to avoid paying her tax refund to her creditors, and failed to seek advise from a qualified professional.
