What Does It Mean to Abandon Property in a Chapter 7 Case?

Generally when someone abandons property, it is assumed that they have decided to leave their own property for someone else to take like a tenant who decides to leave their old lawn mower at their old rented home for use by the next occupant. The term “abandonment” in normal conversation conveys a sense that the owner no longer cares to own certain property.

But, in the context of a Chapter 7 bankruptcy case, “abandonment” has practically the opposite meaning. When a Debtor files a Chapter 7 action to seek relief from financial distress, the property of that Debtor goes in to the bankruptcy estate which is administered from that point by the Bankruptcy Trustee. The trustee has the authority to liquidate or sell the non-exempt property of the Debtor in order to pay claims to creditors of the Debtor. But, in some instances, the Trustee, or the other parties to the bankruptcy case (the creditors and the Debtor) may recognize that some of this property is little or no value. In such a context, the trustee may ask permission from (or move) the Court to allow the bankruptcy estate to “abandon” certain property. The effect of a bankruptcy court’s decision to allow property to be abandoned is the return of the property to the Debtor for his or her own use. No longer will the Debtor have to wait till the end of the case to see if he or she can sell or take some action with regard to some property item.

Occasionally a bankruptcy trustee will secure an order for a Debtor’s car to be abandoned. This happens in situations where the sale value of the vehicle is so low that the Trustee does not believe the sale of it can generate any sizable amount of funds to eventually pay some or all of some creditor’s claims. When the Trustee requests the Court to allow property to be abandoned – taken back from the estate – creditors may object to the request. They may disagree with the notion that a particular piece of property lacks value and obtain an appraisal to challenge the Trustee. Ultimately, the bankruptcy judge makes the call and once an order of abandonment is signed and filed, the property can again be controlled by the Debtor.

In Albuquerque, Giddens & Gatton Law, P.C. 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, P.C. at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.