Bankruptcy Notice of Proposed Abandonment

Chapter 7 bankruptcy petitioners in New Jersey may receive a notice of proposed abandonment in the mail from the bankruptcy court, although this may seem foreboding, it may actually be something positive for the debtor. In New Jersey, a debtor filing for bankruptcy under Chapter 7 is advised that this process involves the liquidation of virtually any asset as a means to discharge the debts that are serving as major a impediment to his or her life. Unfortunately, and much to the chagrin of many debtors, this includes their house. Very often, mortgage payments represent one of the largest debts that a petitioner faces. In addition, an individual's house is usually the most valuable piece of property that he or she owns. Therefore, one of the first properties that a bankruptcy trustee will look to sell to satisfy major debts is a debtor's home. During the bankruptcy proceedings, a trustee will perform a liquidation analysis to ascertain whether or not there is enough equity in the home to warrant the sale of the property. Further, if through this analysis the trustee discovers that the home does not have any value or only has a nominal value, she must alert the court to his fact. When the trustee notices the court of the fact that she has decided to abandon her interest in the property at issue, she will issue a notice of proposed abandonment. If the trustee decides to abandon the property, it means that she does not want to exert the court's right to sell the property to satisfy bankruptcy debts and therefore ownership and control over the house returns to the debtor. Therefore, receiving a copy of a notice of proposed abandonment could prove to be a very good thing for the debtor. It is important to note that the issuance of a notice of proposed abandonment does not mean that the debtor automatically receives control over his or her house again. Any creditor or party has the right to file an objection to the court's abandonment of the property and receive a hearing before the court to voice an objection, although this is very rare. If no interested party voices an objection with the court by a specified date, the property abandonment takes place before the scheduled court date. In New Jersey, bankruptcy laws are very complicated, therefore it is strongly advised that a potential debtor seeks out the advice of an experienced bankruptcy attorney to assist him or her with bankruptcy matters. For more information regarding, Chapter 7 bankruptcy, Chapter 13 bankruptcy, foreclosure, or other consumer debt issues in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and not intended to replace the advice of an attorney.

Abandonment of Property By Bankruptcy Trustee

A Bankruptcy Trustee moved to sell the property of a debtor and the debtor cross-moved to compel abandonment of the property based on the debtor's reported transfer to another. Under Section 11 U.S.C. 554(b) of the Bankruptcy Code, the court may, upon request of an interested party and notice of hearing, "order the Trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit." The burden is on the party seeking to compel abandonment to show the property meets the criteria for abandonment. If the burden is met, then the burden shifts to the Trustee to show that the property is of value and can be utilized to satisfy a debt of the bankruptcy estate. The debtors in the matter of In re Taggart sought abandonment on the grounds that the real property was not part of the bankruptcy estate according to Bankruptcy Code Section 541(d) and that, if the real property is deemed to be property of the bankruptcy estate, a constructive trust should be imposed in favor of the disputed buyers. The debtor, Raymond Taggart, claimed the property was transferred to his brother and sister-in-law, Dennis and Kathleen Taggart, brother and sister-in-law of the debtor, prior to filing bankruptcy. Under the law, Raymond Taggart was without rights to transfer the property without assent of the mortgage holder. The Taggart's second argument was that a constructive trust in favor of the alleged buyers, Dennis and Kathleen should be imposed post-petition. Under Section 544(a) the trustee has power to avoid any transfer by the debtor or any voidable obligation incurred by the debtor. The Taggarts could not provide evidence they were bona fide purchasers for value and had not recorded any deed transfer. At best there was an agreement of sorts between brothers and perhaps there was intent to transfer the property to Dennis upon payment in full of the mortgage. Even if transfer to Dennis upon full payment was the intent, Dennis and Kathleen could have taken steps to obtain their own mortgage on the property in order to pay off the mortgage taken by Raymond. As long as Dennis and Kathleen could not obtain a mortgage, Raymond was not unjustly enriched by their payment of the carrying costs because it could be considered rent. For the foregoing reasons, the court finds that there was no basis to impose a constructive trust and the trustee was not required to abandon the property but rather could sell it for the benefit of the unsecured creditors. The manner in which property is titled and used by the debtor can affect the treatment of such property in the event the debtor files for bankruptcy. Knowing how your assets are likely to be treated in bankruptcy often makes a critical difference in the decision of whether to file. If you are considering bankruptcy you should consult with an experienced bankruptcy attorney immediately in order to protect your rights. For more information regarding foreclosure, bankruptcy or other consumer debt matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for information purposes only and in no way is intended to replace the advice of an attorney regarding your specific matter. Our law firm is a debt relief agency and helps people file for bankruptcy relief.

Abandonment Not Automatically Revoked by Reopening Case

In the event an asset is abandoned by a Chapter 7 trustee, the abandonment is not automatically revoked by the Trustee's reopening of the bankruptcy action. In the case of In re Reilly, the bankruptcy trustee appealed the abandonment of a Tevis claim by the trustee during a prior bankruptcy proceeding. The bankruptcy court ruled that a technical abandonment is irrevocable, in the same manner as if a notice of abandonment was filed. The practice of reopening bankruptcy when closed would have the opposite effect of the intent of bankruptcy which is to close all matters and give the debtor a fresh start following the most equitable distribution possible to the creditors. On appeal, the Appellate Court ruled that there is no automatic revocation of abandonment in the event a bankruptcy is reopened. The Appellate Court decided that Federal Rule of Civil Procedure 60(b) must be applied to determine whether to revoke a technical abandonment and remanded the case for consideration of the rule. Under F.R.C.P.60(b), grounds for relief from a judgment, order or proceeding may stem from: (1) mistake, inadvertence, surprise or excusable neglect; (2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud, misrepresentation, or misconduct by an opposing party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or (6) any other reason that justifies relief. It is critical that the bankruptcy trustee consider all matters in order to ensure that the debtor receives a final discharge and obtains the true value of the fresh start they seek. If you are considering bankruptcy you should consult with an experienced bankruptcy attorney immediately in order to protect your rights. For more information regarding foreclosure, bankruptcy or other consumer debt matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for information purposes only and in no way is intended to replace the advice of an attorney regarding your specific matter. Our law firm is a debt relief agency and helps people file for bankruptcy relief.