Pre-Bankruptcy Checks and Property of the Estate in Florida
By Carmen Dellutri, Attorney at Law on Jun 6, 2007 in Bankruptcy Cases & Legislation, Bankruptcy Practice and Procedure, Chapter 7 Bankruptcy, Florida, General Bankruptcy Information
The recent case of Brown v. Pyatt, decided by the 8th U.S. Circuit Court of Appeals, answers a question that has plagued debtors and their attorney for years in the State of Florida. When a debtor files for bankruptcy, an estate is created. The estate is comprised of all the debtor’s legal and equitable interests in property. In this case, the Debtor wrote out and mailed $1,600.00 worth of checks that had not been cashed on the date of the bankruptcy filing. Therefore, his checking account balance was $1,600.00 higher than it should have been.
In Florida, we currently have a $1,000.00 personal property exemption: which means that if you add up the value of all of your stuff and it is less than $1,000.00 then all of your personal property is exempt. However, if you add up all of your stuff and the value of your stuff exceeds $1,000.00, then the excess amount over the $1,000.00 is considered non-exempt. In the case above, the Debtor obviously had $1,600.00 more in his estate than he anticipated.
The Chapter 7 Trustee sued the Debtor attempting to get the money. The Debtor argued that because the checks had been written and mailed prior to the bankruptcy, he should not be held accountable. We have the same problem in Florida, and for years, we have had to make sure our clients have not had outstanding checks at the time of filing.
The Court agreed with the Debtor. Accordingly, in the 8th Circuit, debtor’s checking accounts can still have money from floating checks; however, I would not recommend this practice in the State of Florida, and more particularly, in the Middle District of Florida. Here, we are in the 11th Circuit Court of Appeals, and the rule is simple. Whatever was in the Debtor’s bank account at the time of filing is the balance that is used for determining liquidation, despite what the 8th Circuit Court of Appeals states.
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