"Technical Abandonment" from the Bankruptcy Estate

The recent case of In re Bast, ___ BR ___, 2007 WL 1429481 (Bkrtcy.S.D. Fla.)(Friedman J.) dealt with a motion by a discharged chapter 7 trustee to vacate the final decree and his discharge as trustee about a year after the chapter 7 case was closed as a "no asset case." The motions were filed as part of his efforts to administer an asset for the benefit of creditors. The asset involved was an $82,000 surplus generated by a foreclosure sale of scheduled non-exempt real property after the chapter 7 case was closed.

The Court denied the chapter 7 trustee's motion to vacate the final decree and the trustee discharge. During the chapter 7 case, which was filed in March, 2005, it was not apparent that there was equity in the real property and the chapter 7 trustee did not administer the real property and filed a report of no distribution in April, 2005. Subsequently though, a foreclosure sale on the courthouse steps in St. Lucie County produced a surplus of $82,000 from the sale of the real property.

The Court discussed that there are "basically three types of abandonment that may occur in a bankruptcy case" as set forth in section 554. The first two types of abandonment are set forth in sections 554(a) and (b) and take place upon motion of a party. The third type of abandonment is found in section 554(c). It does not involve a motion and is commonly referred to as a "technical abandonment." A technical abandonment generally results under section 554(c) upon the closing of the case if an asset is disclosed in the schedules and is not administered during the course of the bankruptcy case.

In this case, the requirements for a technical abandonment were met and the non-exempt real property was abandoned from the estate to the debtor at the close of the case. The trustee's subsequent efforts to administer the $82,000 surplus for the benefit of the creditors were denied by the Court. As a result, the debtor was entitled to the $82,000.(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases.