Trustee Can't Surcharge Debtor's Property, High Court Says

Law360, Washington (March 4, 2014, 2:01 PM EST) -- The U.S. Supreme Court ruled in a unanimous opinion Tuesday that bankruptcy trustees cannot impose a surcharge on exempted property due to a Chapter 7 debtor's misconduct, acknowledging that the decision may impose “inequitable results” for trustees and creditors.

In reversing the Ninth Circuit's decision in Law v. Siegel, the high court said that a bankruptcy court's $75,000 surcharge on the bankrupt petitioner, Stephen Law, was illegal because it exceeded the limits of its authority under the Bankruptcy Code, even though Law had committed litigation misconduct...
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