Abandoning/Surrendering Property
Contents
General Rule
The trustee may "abandon" property in chapter 7, 11, & 13 cases under 11 USC § 554.
11 U.S. Code § 554 - Abandonment of property of the estate (a) After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (b) On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (c) Unless the court orders otherwise, any property scheduled under section 521(a)(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title. (d) Unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not administered in the case remains property of the estate.
In a Chapter 7, there is separate authority to abandon under 11 USC § 725
11 U.S. Code § 725 - Disposition of certain property After the commencement of a case under this chapter, but before final distribution of property of the estate under section 726 of this title, the trustee, after notice and a hearing, shall dispose of any property in which an entity other than the estate has an interest, such as a lien, and that has not been disposed of under another section of this title.
Notice and Hearing requires only an "opportunity for a hearing"
See 11 USC 102 and Bankruptcy Rule 6007 and its commentary.
Common practice is for the trustee to file a "Notice of Intent to Abandon" that is self-effectuating if no creditor requests a hearing.
Insuring Standards
Abandonment by Trustee
Code 554(a) provides that: “[a]fter notice and hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.” Title to property that is abandoned by the trustee vests back in the debtor. As stated above, “after notice and hearing” does not require a hearing or a court order provided that the Notice of Abandonment is given to all parties in interest, and no hearing is scheduled or no objection to the abandonment is filed. Under Bankruptcy Rule 6007(a), a party in interest has 15 days after mailing of the notice of abandonment (or such other time as fixed by the court) to file an objection to the abandonment. If an objection is filed, a hearing will be scheduled.
To insure a sale or mortgage by the debtor of property abandoned by the trustee, certified copies of the following must be recorded:
- Notice of Abandonment; and
- Bankruptcy Docket showing no objection to the notice of abandonment and no hearing scheduled; and if applicable
- Order denying the objection, if an objection was filed;
Constructive Abandonment
Code Section 11 USC 554(c) states that any property scheduled which is not administered upon closing the bankruptcy case is abandoned to the debtor. What this means is that if a parcel of property, which is listed in the bankruptcy schedules, is not sold, allowed as exempt, or specifically abandoned by the trustee, it is not administered and is considered to be abandoned to the debtor.
If an asset wasn't scheduled at all, it may remain as a bankruptcy asset
To insure based upon this type of abandonment, record certified copies of the following:
- Schedule A listing the property as an asset; and
- The trustee’s final report showing that the property was not sold or otherwise used by the trustee.
In Chapter 13, sometimes referred to as "Surrender"
See 11 USC 1325(a)(5)(C).