Nakhuda v. Mansdorf (In re Nakhuda)
- Citation:
- Nakhuda v. Mansdorf (In re Nakhuda), BAP No. NC-14-1235-TaPaJu (B.A.P. 9th Cir. Mar. 2, 2015) (NOT FOR PUBLICATION)
- Tag(s):
-
- Ruling:
- AFFIRMING the bankruptcy court, the Bankruptcy Appellate Panel of the Ninth Circuit held that (i) the bankruptcy court did not err in granting the chapter 7 trustee's requested relief on an ex parte basis, (ii) debtor was not authorized to continue operating two sole proprietorships, and (iii) debtor was statutorily required to surrender to the chapter 7 trustee the keys to the sole proprietorships, bank records, and estate funds.
Under section 521(a)(4) of the Bankruptcy Code, a debtor has an affirmative duty to surrender all estate property and records to a chapter 7 trustee. This duty is non-negotiable. Likewise, section 521(a)(3) requires that a debtor cooperate with a trustee to enable the trustee to perform his or her duties. The Bankruptcy Code, under section 721, also makes clear that, unlike in a chapter 11 case, continued operation of a debtor's business can only occur by (or in cooperation with) the chapter 7 trustee and only after approval by the court. Here, the chapter 7 trustee merely sought an order requiring debtor to comply with his statutory duties. Because it mattered not whether debtor received notice and the opportunity to be heard on trustee's application, ex parte relief was appropriate.
- Procedural context:
- The bankruptcy court entered an order granting chapter 7 trustee's ex parte application seeking an order requiring debtor to cease operation of two sole proprietorships, to cease use or consumption of estate assets, and to turn over bank account balances, keys to properties, and bank records. Debtor unsuccessfully moved twice to set aside the order. Debtor appealed from all three orders.
- Facts:
- Debtor owned two sole proprietorship laundromats. The chapter 7 trustee learned at the section 341 meeting of creditors that debtor continued to operate the businesses despite having filed a chapter 7 case. The chapter 7 trustee filed an ex parte application with the bankruptcy court, seeking an order requiring debtor to (a) cease operations, (b) cease use of estate assets, and (c) to turn over keys to the business properties, account balances, and bank records. The bankruptcy court granted the application without delay. Debtor filed two separate ex parte applications to set aside the order, each of which was denied.
- Judge(s):
- TAYLOR, PAPPAS, and JURY
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