The Casey Anthony Bankruptcy: A Case Study of a Bankruptcy Trustee's Power

Pursuant to various sections of the bankruptcy code, the interim trustee assigned to a Chapter 7 bankruptcy case has the right to assume the role of the debtor in nearly all forms. The Trustee can step into the debtor's shoes to avoid fraudulent or preferential transfers, pursue claims that the debtor can collect on, take and sell property, administer and liquidate assets, and generally pursue any action that might bring any benefit to the bankruptcy estate. Like we've discussed before, once a debtor files a voluntary petition under the bankruptcy code, any assets or liabilities become property of the bankruptcy estate for the trustee to administer.

Understanding the role of the trustee in this context, we have the situation in Florida where the bankruptcy trustee administering Casey Anthony's Chapter 7 bankruptcy wants to sell her life story for the benefit of her creditors. His argument goes to the crux of just what property the bankruptcy estate holds. The trustee there is arguing that although there is no manuscript, no writing, no rough draft, nothing, that the concept of Casey Anthony's life story is still property of the bankruptcy estate that can be sold off to creditors.

The issue hasn't been resolved yet but raises some issues that are perhaps novel in bankruptcy law. Just what constitutes, in this context, property of the estate? 11 U.S.C. 541(a)(1) provides that the estate is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." There are certain provisions that are allowed to be considered part of the estate, pursuant to 541(a)(5), within 180 days after filing, but these are limited under the code to property received as a gift or inheritance, property settlement in divorce or similar proceeding, or received as a beneficiary to a life insurance policy. There is nothing explicitly mentioned about the right to future proceeds of labor.

Anthony's attorney argues that allowing the bankruptcy trustee to collect on her life story, one that has not yet been even reduced to paper or even had preliminary discussions thereof, would embark the bankruptcy court on a slippery slope. It would, the argument goes, make potential ideas or future labor part of the present bankruptcy estate, a concept found nowhere in bankruptcy law. The bankruptcy trustee, on the other hand, would argue that the publicity surrounding the case, along with the potential value of such a published life story, exist now and would be highly beneficial to the approximately $800,000 she owes to unsecured creditors.

Regardless, the stage is set for a potentially landmark decision that could set future precedent. A decision by the Florida bankruptcy judge would certainly seem to benefit future unsecured creditors. Debtors' attorneys will argue that attempting to exploit and sell ideas in debtors' heads or potential proceeds of debtors' labor is speculative at best and at minimum an abuse of trustee powers. We will know more in coming weeks, but stay tuned to see which way the judge decides and the potential impact on bankruptcy law.