Chapter 7 Bankruptcy Cases & Abandonment

 Abandonment occurs when the bankruptcy estate, voluntarily or involuntarily, at the request of a party in interest, releases its interest in property.  Upon abandonment, the debtor’s interest is restore nunc pro tunc as of the date of the filing of the bankruptcy petition. 

The party requesting abandonment must send notice of that request to all parties and have the matter set before the court.  Section 544(a) and (b) deal with abandonment of property on request of the trustee or another party.  Section 544(c) deals with technical or implied abandonment.  Unless the court orders otherwise, a technical or implied abandonment occurs if the trustee has not administered the property at the time of closing of the case.  Thus, upon discharge, the property is abandoned back to the debtor. 

The party seeking to establish abandonment bears the burden of proving that the property was abandoned.  The party must show that the property is burdensome or inconsequential as to value and as to benefit of the estate.

In practical terms, we have brought a motion compelling the trustee to abandon interest in property in the case of a short sale on real estate property.  In certain cases, the debtor is concerned about losing a potential buyer if he must wait until discharge to sell the property.  Prior to discharge, the property remains property of the estate and cannot be sold.  There is a court cost ($150.00) to bring the motion to compel abandonment.  In most cases, it is simply better to wait until the discharge, the property reverts back to the debtor and the debtor can pursue the short sale.