The Bankruptcy Code requires an entity in possession, custody, or control of property of the estate, including exempt property, to deliver that property to the trustee, unless the property is of inconsequential value to the estate.
Debtors must turn over property of the personal bankruptcy estate that is not specifically exempted, or provide the cash value of the property to the trustee. Property, whether tangible or intangible, levied upon prepetition but not transferred prepetition is property of the bankruptcy estate subject to turnover. Any tangible property seized prepetition but not sold prepetition is property of the bankruptcy estate subject to turnover.
Third-party debtors who owe money to the debtor in personal bankruptcy must pay the trustee promptly. Third-party debtors who do not have actual notice of the commencement of a personal bankruptcy case are not punishable for failure to pay the trustee. Life insurance companies are exempted from prosecution and are allowed to take property from the personal bankruptcy estates of their policyholders. Attorneys, accountants, bookkeepers, and others that hold records of the debtor and personal bankruptcy estate must turnover records to the trustee when given notice of a court order.
After turnover, seizure, or forfeiture, the trustee is subject to strict requirements regarding the sale of assets. Notice of a pending sale must be given to all creditors who file a proof of claim. Trustees are directed to advertise public auctions. However, other than large commercially advertised auctions, few people receive actual notice of trustee auctions.