U.S. Code » Title 11 » Chapter CHAPTER 5— CREDITORS, THE DEBTOR, AND THE ESTATE › Subchapter SUBCHAPTER III— THE ESTATE

11 U.S.C. § 542

Turnover of property to the estate

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(a) Except as provided in subsection (c) or (d) of this section, 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 section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.(b) Except as provided in subsection (c) or (d) of this section, an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor.(c) Except as provided in section 362(a)(7) of this title, 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, or pay a debt owing to the debtor, in good faith and other than in the manner specified in subsection (d) of this section, to an entity other than the trustee, with the same effect as to the entity making such transfer or payment as if the case under this title concerning the debtor had not been commenced.(d) A life insurance company may transfer property of the estate or property of the debtor to such company in good faith, with the same effect with respect to such company as if the case under this title concerning the debtor had not been commenced, if such transfer is to pay a premium or to carry out a nonforfeiture insurance option, and is required to be made automatically, under a life insurance contract with such company that was entered into before the date of the filing of the petition and that is property of the estate.(e) Subject to any applicable privilege, after notice and a hearing, the court may order an attorney, accountant, or other person that holds recorded information, including books, documents, records, and papers, relating to the debtor’s property or financial affairs, to turn over or disclose such recorded information to the trustee.(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2595; Pub. L. 98–353, title III, § 457, July 10, 1984, 98 Stat. 376; Pub. L. 103–394, title V, § 501(d)(16), Oct. 22, 1994, 108 Stat. 4146.)Historical and Revision Noteslegislative statements

Section 542(a) of the House amendment modifies similar provisions contained in the House bill and the Senate amendment treating with turnover of property to the estate. The section makes clear that any entity, other than a custodian, is required to deliver property of the estate to the trustee or debtor in possession whenever such property is acquired by the entity during the case, if the trustee or debtor in possession may use, sell, or lease the property under section 363, or if the debtor may exempt the property under section 522, unless the property is of inconsequential value or benefit to the estate. This section is not intended to require an entity to deliver property to the trustee if such entity has obtained an order of the court authorizing the entity to retain possession, custody or control of the property.

The House amendment adopts section 542(c) of the House bill in preference to a similar provision contained in section 542(c) of the Senate amendment. Protection afforded by section 542(c) applies only to the transferor or payor and not to a transferee or payee receiving a transfer or payment, as the case may be. Such transferee or payee is treated under section 549 and section 550 of title 11.

The extent to which the attorney client privilege is valid against the trustee is unclear under current law and is left to be determined by the courts on a case by case basis.

senate report no. 95–989

Subsection (a) of this section requires anyone holding property of the estate on the date of the filing of the petition, or property that the trustee may use, sell, or lease under section 363, to deliver it to the trustee. The subsection also requires an accounting. The holder of property of the estate is excused from the turnover requirement of this subsection if the property held is of inconsequential value to the estate. However, this provision must be read in conjunction with the remainder of the subsection, so that if the property is of inconsequential monetary value, yet has a significant use value for the estate, the holder of the property would not be excused from turnover.

Subsection (b) requires an entity that owes money to the debtor as of the date of the petition, or that holds money payable on demand or payable on order, to pay the money to the order of the trustee. An exception is made to the extent that the entity has a valid right of setoff, as recognized by section 553.

Subsection (c) provides an exception to subsections (a) and (b). It protects an entity that has neither actual notice nor actual knowledge of the case and that transfers, in good faith, property that is deliverable or payable to the trustee to someone other than to the estate or on order of the estate. This subsection codifies the result of Bank of Marin v. England, 385 U.S. 99 (1966), but does not go so far as to permit bank setoff in violation of the automatic stay, proposed 11 U.S.C. 362(a)(7), even if the bank offsetting the debtor’s balance has no knowledge of the case.

Subsection (d) protects life insurance companies that are required by contract to make automatic premium loans from property that might otherwise be property of the estate.

Subsection (e) requires an attorney, accountant, or other professional that holds recorded information relating to the debtor’s property or financial affairs, to surrender it to the trustee. This duty is subject to any applicable claim of privilege, such as attorney-client privilege. It is a new provision that deprives accountants and attorneys of the leverage that they have today, under State law lien provisions, to receive payment in full ahead of other creditors when the information they hold is necessary to the administration of the estate.

Editorial NotesAmendments

1994—Subsec. (e). Pub. L. 103–394 substituted “to” for “to to” after “financial affairs,”.

1984—Subsec. (e). Pub. L. 98–353 inserted “to turn over or” before “disclose”.

Statutory Notes and Related SubsidiariesEffective Date of 1994 Amendment

Amendment by Pub. L. 103–394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103–394, set out as a note under section 101 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title.

Notes of Decisions
Cited in 1,903 cases (216 in the last 5 years), 1956–2026 · leading case: White v. Brown (In Re White), 389 B.R. 693 (9th Cir. BAP 2008).
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White v. Brown (In Re White), 389 B.R. 693 (9th Cir. BAP 2008). · cites it 8× “The trustee thereupon filed a motion for turnover of the homestead sale proceeds pursuant to 11 U.S.C. § 542 (a), which led to an evidentiary hearing on June 27, 2007.”
Calvin v. Wells Fargo Bank, N.A. (In Re Calvin), 329 B.R. 589 (Bankr. S.D. Tex. 2005). · cites it 9× “The Debtors argue that pursuant to 11 U.S.C. § 542 (a), the Bank should have immediately delivered the funds to Ronald J.”
Parameswari Veluchamy v. Bank of Am., N.A., 879 F.3d 808 (7th Cir. 2018). · cites it 4× “First, the senior Veluchamys argue that turnover under 11 U.S.C. § 542 is not the appropriate remedy where, as claimed here, there is a legitimate dispute about ownership of the property the trustee seeks to recover.”
Braunstein v. McCabe, 571 F.3d 108 (1st Cir. 2009). · cites it 6× “The first is whether there is a jury trial right under the Seventh Amendment in actions by trustees to compel the turnover of property to the estate under 11 U.S.C. § 542 . The second concerns what is meant by the “ordinary course of business” of a debtor for purposes of 11 U.”
Redfield v. Peat, Marwick, Mitchell & Co. (In Re Robertson), 105 B.R. 440 (Bankr. N.D. Ill. 1989). · cites it 13× “§ 157 and § 1334, and also on 11 U.S.C. § 542 . However, he does not seek a turnover order against any Defendant, the Debtor having already received and apparently spent the funds transferred to him from the other Defendants.”
In Re Balbir Singh Tuli, Debtor. Balbir Singh Tuli v. Repub. of Iraq, 172 F.3d 707 (9th Cir. 1999). · cites it 4× “Concluding it lacked personal jurisdiction, the bankruptcy court declined to enter a default judgment on Tub’s adversary proceeding complaint against Iraq for the turnover of estate property pursuant to 11 U.S.C. § 542 . Alternatively, the bankruptcy court held that, because the…”
TranSouth Fin. Corp. v. Sharon (In Re Sharon), 234 B.R. 676 (6th Cir. BAP 1999). · cites it 6× “Compare 11 U.S.C. § 542 (b) (excusing delivery of money owed to an estate when the creditor has a right of setoff under § 553).”
Joy Denby-Peterson v., 941 F.3d 115 (3rd Cir. 2019). · cites it 5× “It identified the split among our sister circuits on this issue, pointing out that the Second, Seventh, Eighth, and Ninth Circuits (“the majority”) have held that the Bankruptcy Code’s turnover provision requires immediate turnover of estate property that was seized pre-petition…”
Hawaiian Airlines, Inc. v. Mesa Air Grp., Inc., 355 B.R. 214 (D. Haw. 2006). · cites it 7× “In its complaint, HAL alleges that Mesa breached a confidentiality agreement entered into in connection with the bankruptcy reorganization and seeks return of certain confidential information under 11 U.S.C. § 542 (a). Mesa filed a counterclaim alleging that HAL has an unlawful…”
Greene v. Schmukler (In Re De Berry), 59 B.R. 891 (Bankr. E.D.N.Y. 1986). · cites it 10× “The complaint seeks a turnover order pursuant to 11 U.S.C. § 542 (a) of $25,000, which sum represents the settlement of a personal injury action commenced on the Debtor’s behalf prior to the inception of the bankruptcy case and an accounting for *893 those settlement proceeds.”
Jurista v. Amerinox Processing, Inc., 492 B.R. 707 (D.N.J. 2013). · cites it 5× “Count 7: Turnover under 11 U.S.C. § 542 . 755 5. Count 13: Breach of the Implied Covenant of Goo d Faith and Fair Dealing.”
Helms v. Roti (In Re Roti), 271 B.R. 281 (Bankr. N.D. Ill. 2002). · cites it 5× “Each Defendant is ordered under 11 U.S.C. § 542 to turn over to the Trustee the sum of $29,850.”
Show all 1,903 citing cases →
— 11 U.S.C. § 542(a) — 7 cases
In Re Young, 193 B.R. 620 (D.D.C. 1996).
Krohn v. Burton (In re Swift), 496 B.R. 89 (Bankr. E.D.N.Y. 2013).
In Re Winnett, 97 B.R. 7 (Bankr. E.D. Cal. 1989).
Nurses' Registry & Home Health Corp. v. Burwell (In re Nurses' Registry & Home Health Corp.), 533 B.R. 590 (Bankr. E.D. Ky. 2015).
Ctr. for Advanced Mfg. & Tech. v. Wrightco Tech., Inc. (In re Ctr. for Advanced Mfg. & Tech.), 331 B.R. 649 (Bankr. W.D. Pa. 2005).
— 11 U.S.C. § 542(b) — 3 cases
In re Weidenbenner, 521 B.R. 74 (Bankr. S.D.N.Y. 2014).
Craig v. McCarty Ranch Trust (In re Cassidy Land & Cattle Co.), 836 F.2d 1130 (8th Cir. 1988).
Askenaizer v. Recore Trading Co., LLC (In re Catco Recycling, LLC), 559 B.R. 293 (Bankr. D.N.H. 2016).
— 11 U.S.C. § 542(c) — 2 cases
In Re Figueira, 163 B.R. 192 (Bankr. D. Kan. 1993).
Forbes v. Lucas (In Re Lucas), 100 B.R. 969 (Bankr. M.D. Tenn. 1989).
— 11 U.S.C. § 542(e) — 1 case
In Re Ez Pay Servs., Inc., 389 B.R. 776 (Bankr. M.D. Fla. 2008).
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