The Peculiar Meaning of Abandonment in Bankruptcy Cases

In any and all fields of law, certain nomenclature can often have a different meaning than in other settings. The term “abandonment” appears to be one of these words but, upon closer scrutiny, generates some confusion only as to who is actually abandoning property. An order from the United States Bankruptcy Court in Albuquerque permitting abandonment of property provides a recent example of this.

In the case of In Re Seegel, Case No. 13-11726-j7. (U.S. Bankr Ct. N.M. 2014), the Court issued a default order granting a motion to abandon certain real estate owned by the Debtor in the case. Neither the Trustee in the case nor the Debtor objected to a motion of a lienholder for abandonment. The significant point to keep in mind is that the decision does not require the Debtor to abandon his own property. Rather it instructs the Trustee to abandon the property from the bankruptcy estate.

When a debtor seeks bankruptcy protection, the property of that debtor becomes part of the bankruptcy estate which itself is then administered by the trustee (or, in the chapter 11 cases, by the “debtor in possession”). Until certain claims on property are officially discharged and the case reaches its conclusion, the trustee exercises control of the property. But a trustee or other party can move the court to allow abandonment of certain property from the estate where:

  1. that property is of “inconsequential value and benefit” to the estate;
  2. the property is “burdensome” to the estate; or
  3. where there is some other good reason why property of the estate should not be used to pay creditors.

Accordingly, the bankruptcy estate, not the debtor, abandons the property to the debtor. In many cases, the property in question has so little value or so little equity above any secured claims that it offers no constructive purpose towards the resolution of any claims duly asserted by unsecured creditors in a bankruptcy context.

In Albuquerque, Giddens & Gatton Law, PC has bankruptcy attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases and can specifically provide advice as to disposition of property in Chapter 7, Chapter 11 and Chapter 13 cases.. The New Mexico 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 Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.