CHAPTER 5CREDITORS, THE DEBTOR, AND THE ESTATE
Sub Chapter III The Estate
Sec. 542. Turnover of property to the estate
(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
(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,
Sec. 457, July 10, 1984, 98 Stat. 376; Pub. L. 103-394, title V,
Sec. 501(d)(16), Oct. 22, 1994, 108 Stat. 4146.)
Historical and Revision Notes
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.
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''
Effective 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.
Section Referred to in Other Sections
This section is referred to in sections 106, 349, 502, 522, 541, 549
of this title.