What Does It Mean When the Chapter 7 Trustee Abandon Assets?

Chapter 7 trustee’s right to abandon assets in a Chapter 7 Bankruptcy

A Chapter 7 trustee’s right to abandon assets in a Chapter 7 Bankruptcy filing is governed by Section 554 of the United States Bankruptcy Code.  The Code states there are two ways the debtor’s assets are abandoned in a Chapter 7 bankruptcy case.  First, the trustee can file a notice of abandonment with the court and the second way is a presumptive abandonment.  If an asset was listed by the debtor but not administered by the trustee, when the case is closed it is deemed that the asset has been abandoned.

You may ask yourself why would a Chapter 7 trustee choose to abandon the asset?  The main reasons to abandon bankruptcy estate assets of the debtor are 1) the administering of the asset would be burdensome or 2) the value of the asset to the bankruptcy estate is inconsequential.

An Example of Abandoned Assets

For example, debtor may own a field full of salvage vehicles.  Do they have any value?  Of course, they do.  However, the scrap value is modest compared to the expense to administer these assets.  It would be necessary to hire a flatbed tow truck to remove vehicles from the lot and then you would have to sell them one at a time.  The cost necessary to remove and sell them would likely be more than the vehicles are worth.

As such, the trustee can abandon these assets.  Either by filing a notice of abandonment with the court or simply letting the case close with administering the assets.  If a creditor feels there is value to the assets they have the right to object to the abandonment.

Once abandoned the title to the assets reverts to the debtor.  At that point, the debtor is free to then dispose of the asset as they desire.

When you feel the time is right to discuss or file bankruptcy call Pikunis Law at (856) 282-5505.


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