Abandonment of Debtor’s Property in Chapter 7 Cases

In Chapter 7 bankruptcy cases debtors enjoy certain protections – such as the automatic stay which protects the debtor’s property from creditors and lawsuits and other actions – but also gives up certain control over the estate’s assets. Upon filing the Chapter 7 bankruptcy action, all of a debtor’s property becomes part of the estate. The court then has the power to appoint a trustee who has the authority to administer that estate. This includes, among other powers of the trustee, liquidating certain property so as to accumulate funds which can be used to pay off some portion of various creditors’ claims.


However, a debtor or party of interest can make a motion with the court to have the trustee abandon certain property which is part of the estate. If such motion is made, the court can order the trustee to make an assessment as to the value of such property. In the case of In re Ferri, Case No. 7-08-12397-JL. (U.S. Bankr. Ct. 2014), the bankruptcy judge in New Mexico ordered the trustee to report back as to the value of property the moving party wishes to be abandoned. In this case, the trustee determined, pursuant to 11 U.S.C. §554, that  the debts and obligations of the Companies – owned by the Debtor – far exceed the value of the assets of the Companies, and such assets and the Companies are burdensome and not beneficial to the estate. As well, the trustee concluded that various state court litigation involving the Debtor and his companies (together, the “State Court Litigation”) is of inconsequential value and also burdensome to the estate.


The trustee did find other property owned by the Debtor, such as his gun collection and certain additional items, do have value. Accordingly, the bankruptcy court ordered that those items cannot be abandoned. But as to those assets, mentioned above, which are “burdensome and not beneficial to the estate” can be abandoned by the trustee. Such property goes back to the Debtor even where such was listed in bankruptcy schedules which the Debtor was required to file early in the Chapter 7 bankruptcy case.


In Albuquerque, Giddens & Gatton Law, PC has attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, PC at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.