Frequently, clients of our San Diego Bankruptcy Firm will come in running and screaming to our offices upon receipt of a little white piece of paper titled “Trustee’s Notice of Proposed Abandonment of Property.“ The notice is usually sent out by the Chapter 7 Trustee shortly after their bankruptcy case is filed, hence the excitement and grave concern. The pursuing dialogue usually goes something like this:
“Look! My trustee wants to sell my house! I have to abandon it immediately! How can this be? You said I can keep my house!” After engaging in some active listening as the client fully express themselves, the energy in the room is quickly shifted to rest, assurance, and peace once I explain what the notice is really stating. Though the title of the notice might be somewhat ambiguous, a careful reading of the notice should give rise to clarity and sense of overall peace and relaxation. To fully understand what the notice means we must review a little bankruptcy 101.
With the commencement of every Chapter 7 bankruptcy case there is a trustee appointed to overlook that particular case. The Chapter 7 trustee’s job is to make sure the bankruptcy laws are being properly carried out in the case assigned and to liquidate (administer) any non-exempt assets in the case to pay the claims of creditors.
As we have discussed in previous blogs, the vast majority of cases filed are called “no-asset” cases, as what seemingly little assets do exist can usually be exempt under state and/or federal laws. It is very rare the Chapter 7 trustee actually takes assets of the debtor and sells them to pay the debtor’s creditors, but it does happen, often times when debtors fail to list property they own. In such case the trustee will file a “notice of assets and request to set claims bar date” which will trigger the bankruptcy court to send a notice to all creditors listed in that bankruptcy case.
However, if there are no assets to administer for the benefit of creditors, the Chapter 7 trustee will file a “report of no distribution/no assets” with the court. So then what is this “Trustee’s Notice of Proposed Abandonment of Property?” Quite simply, the Chapter 7 trustee is notifying all interested parties, which includes the Debtor and all Creditors, that he or she will not be selling or otherwise administering the property listed in the notice to pay claims of creditors. The notice will usually indicate why the trustee is not pursing the property, be it there is little or no equity in the property, the costs of collection or litigation will probably exceed and recovery, the preservation of the asset is burdensome to the estate, it is ssecured by a large debt, or some other reason that may deem to apply.
By providing this notice, the Trustee is reducing his liability to the estate to safeguard assets and he is also returning the property back to the control and direction of the owner, be it the debtor or other 3rd party. He is also protecting himself in case a creditor later questions why the asset was abandoned since the Trustee is providing an opportunity for all creditors to object to his “notice of intended action.”
In all, the proposed notice of abandonment is a welcomed notice and should be kept with all other notices received in your case. It should be noted that not all trustee’s will file a notice of abandonment for all assets in every case, so if you didn’t receive a notice of abandonment don’t worry, chances are you have nothing to worry about. But if you do receive one, do not worry about it as it just means the property is being abandoned back to you and anyone else that has an interest in the property.
Written by Shawn Doan– Shawn Doan has successfully represented thousands of clients in Bankruptcy proceedings. He is admitted to practice in the Supreme Court of California and the Southern, Central, and Eastern Federal District Courts of California. Mr. Doan has successfully litigated hundreds of claims against credit card companies that willfully violate the bankruptcy code and other state and federal laws designed to protect consumers. Shawn’s present and past professional affiliations include being a member of the Consumer Attorneys of San Diego, American Bar Institute, Bar Association of North County, Association of Trial Lawyers of America, National Bankruptcy Institute, National Association of Consumer Bankruptcy Attorneys, American Bankruptcy Institute, North County Attorney Referral Service, and San Diego County Attorney Referral Service.
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