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FW: Compelling Abandonment by Trustee in Chapter 7? [BK68]
Dear Jason,
First a nitpick. Abandonment takes place under 554, not 544. Now to the content of your question.
The debtor is most certainly a party in interest, so the debtor can file a motion to compel abandonment under 554(b), pursuant to Fed. R. Bankr. Proc. 6007(b). See, e.g., Wissman v. Pittsburgh Nat. Bank, 942 F. 2d 867, 873 (4th Cir. 1991):
[The debtor] may . . . move the bankruptcy court to compel the trustee to abandon the estate's interest in any [asset] pursuant to Bankruptcy rule 6007(b). If, after a hearing, the trustee refuses to abandon or join the action, the bankruptcy court should compel abandonment . . .
However, in the motion the debtor must
. . . establish by a preponderance of the evidence that the Property s burdensome or of inconsequential value and benefit to the estate . . .
In re Viet Vu, 245 BR 644, 650 (B.A.P. 9th Cir. 2000).
If the trustee can refute the debtor's assertion of inconsequential value, then the motion will, of course, be denied. Id. at 646 (The trustee filed a sale motion that was granted at the same hearing set to consider both the sale motion and the motion to abandon. Since there was a buyer who would pay enough to provide a dividend to the creditors, the property was not burdensome or of inconsequential value).
When enough time has passed after the initial meeting of creditors, the debtor could argue that the asset is burdensome or of inconsequential value because the trustee has been unable to liquidate. How long is enough time? It's hard to say, and will depend on the circumstances. I suppose the better approach might be to move to compel conclusion of the 341 meeting. Include an argument based on Fed. R. Bankr. Proc. 4003: the debtor is in a state of limbo regarding his exempted assets, and needs the meeting concluded to enjoy his assets without fearing a challenge to his exemptions. Once the motion is granted, bypass the court and ask the clerk to issue the discharge, and shortly thereafter ask the clerk to close the case. At that point 554(c) applies.
However, don't bother to take any action unless many months have passed. A judge is likely to defer to a trustee who says that the asset can be liquidated for the benefit of creditors unless so much time has passed that it looks like the trustee is unreasonably stalling.
Finally, see In re Gebhart, 621 F. 3d 1206 (9th Cir. 2010) for an example of a case in which the Debtor initially was able to exempt the equity in his primary residence, but ended up losing the property because the value increased above the equity exemption amount before the Bankruptcy Court closed the case. In that horror story the liquidation sale took place more than five years after the filing date! It is because of this case that I recommend trying the compelling conclusion of the 341 approach, followed by bypassing the court and using the clerk's office to get the discharge issued and the case closed.
Good luck,
Nick
Nicholas Gebelt, Ph.D., J.D.
Certified Bankruptcy Specialist
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