Delaware Bankruptcy Insider:
Be In The Know

About This Blog

The Delaware Bankruptcy Insider is a premier blog designed to bring its readers a comprehensive analysis of the latest Delaware corporate bankruptcy news and rulings.  Brought to you by Ashby & Geddes, P.A.

Get Updates By Email


Judges and Courts

View All
View less

Recent Posts


For more information

Ricardo Palacio, Esq.
(302) 504-3718

Gregory A. Taylor, Esq.
(302) 504-3710

Ashby & Geddes, P.A.
500 Delaware Avenue
P.O. Box 1150
Wilmington, Delaware 19899-1150
(302) 654-1888               

What Does It Mean to “Recover” Property (or the Value Thereof) for the Benefit of the Estate?

In re Allen, No. 13-3543, 2014 WL 4783085 (3d Cir. Sept. 26, 2014)

The Third Circuit was recently given the opportunity to explore what is required for “recovery” of property for the benefit of an estate under section 550 of the Bankruptcy Code.  In its own Florida bankruptcy proceeding, Advanced Telecommunication Network (“ATN”) avoided a transfer to Daniel W. Allen, Sr. (“Allen”), one of its former owners, and obtained a recovery order pursuant to section 550.  ATN pursued collection in the Florida courts but Allen actively impeded ATN’s efforts by transferring funds to trust accounts located in the Cook Islands, refusing to comply with court orders, and commencing a chapter 7 bankruptcy proceeding in New Jersey.  In Allen’s proceedings, ATN sought court approval to continue its collection efforts in Florida, but the bankruptcy court ruled that those efforts were stayed as the monies at issue were property of Allen’s estate because ATN never obtained “tangible possession of the funds.”  The district court affirmed.  The Third Circuit rejected the lower courts’ overly narrow interpretation of section 541, holding that the avoided funds were recovered by ATN when it secured from the Florida bankruptcy court the recovery order under section 550.  In reaching its conclusion, the Court noted that no case relied upon by the lower courts imposed a “tangible possession” requirement and that to do so rendered the language of section 541 superfluous.  More specifically, section 541(a)(3) provides that property of the estate includes property “wherever located and by whomever held.”  Indeed, the Court noted that to require tangible possession would impose a hurdle so high that practically “no one but the trustee could ever possess estate property.”