In a Chapter 7 case, usually property that can’t be exempted is sold and distributed to creditors by the trustee.
However, at times property is burdensome or of little value to the bankruptcy estate. In these circumstances, abandonment of the property is appropriate. If the case is going to be open for a while pending the administration of assets, abandonment requires an affirmative act.
However, only the trustee in a Chapter 7 case has the power to abandon an asset. For another party, such as a creditor or a debtor, abandonment requires a motion, which may be contested by the trustee. There is also currently a $250 filing fee for motions to abandon property.
Since the trustee has the discretion to abandon property, it makes sense, if possible, to negotiate the trustee’s assent to the abandonment before filing a contested motion:
References: 11 USC 554; Fed.R.Bankr.P. 6007.
Nicholas Ortiz, Boston Bankruptcy Attorney
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Last modified: November 25, 2008