Why would a ch. 7 trustee send an abandonment notice on exempt property?

Asked about 1 year ago - Phoenix, AZ

The property is a principal residence that is exempt by law.

Attorney answers (4)

  1. Matthew Scott Berkus

    Contributor Level 20

    8

    Lawyers agree

    Answered . Even exempt property belongs to your bankruptcy estate until the bankruptcy is closed. The abandonment notice releases the property early.

  2. Charles M Leftwich Jr

    Pro

    Contributor Level 9

    5

    Lawyers agree

    Answered . The simple answer is that the Chapter 7 trustee is required by law to give notice to all interested parties (i.e., creditors) of his or her intent to abandon property. Thus, the court requires the Trustee to inform all interested parties what he or she may do with certain property. This bankruptcy “Notice of Intent” triggers deadlines to respond by which the creditors must answer or else they will lose their procedural rights to the property.

    Please note, the real question that should be asked is "Why is the Trustee abandoning the property?" Does the asset have any value? And if not, "What does it mean to me?"

    As you may know, the Chapter 7 Trustee has a duty to liquidate any property or interest (i.e., a fractional or partial ownership of property) that is not protected by an exemption. If the asset or property has value the Trustee can sell the asset to pay your creditors. That is the role of the Trustee. Thus, to escape the court imposed obligation to liquidate the property or alternatively remain obligated to the creditors, the Trustee gives ample notice to them of his or her intent not to sell a particular piece of property.

    Usually the recovery from the sale of the asset is for pennies on the dollar. For example, if an asset is worth one hundred dollars ($100.00) and there are ten (10) creditors, then each creditor may be entitled to ten dollars or less if the estate property is liquidated. Please note, this is an extremely simplified example, as trustee administrative costs are not factored in the above calculation.

    Absent any statutes or case law to the contrary that excludes certain property from being included in the bankruptcy estate "all" property owned by the debtor may be subject to the claim of the Bankruptcy Trustee (i.e., an ERISA qualified retirement account, etc.) He or she may stand in your shoes. Some property is exempt and some is not worth selling. If the asset or property is not very valuable, then the Trustee may make a determination that it is not worth liquidating to pay the creditors. The process to remove the Trustee’s interest is called “To Abandon the Property.” This process is factually sensitive as it applies to each bankruptcy case. The Trustee may abandon property to allow a secured creditor to proceed with recovery actions after a “Lift Stay Motion” has been filed by the creditor or requested by a debtor who attempts to get a loan modification while in bankruptcy.

    I hope this answers your question, if it does please select best answer. Thanks

  3. Patrick Begley

    Contributor Level 14

    5

    Lawyers agree

    Answered . Possibly because there could be creditors who want to enforce their liens against that property. For instance, the equity in the property could be exempt but if the mortgage hasn't been paid, they can still foreclose. The trustee could be clearing the way for them to do so. You should consult with your attorney.

    The information provided in this post is not "legal advice." Rather it is general information on common legal... more
  4. Leonard Roy Boyer

    Pro

    Contributor Level 16

    3

    Lawyers agree

    Answered . The trustee has done you a favor by doing so, I agree with the answers of my colleagues. Your property is still part of the estate in Bankruptcy until your case is discharged. This means your house is not at risk.

    Leonard R. Boyer, Esq. 201-.675-.5577. If you found this Answer helpful, please mark it as "Best Answer" Please be... more

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