Trustee’s Abandonment of Property Does Not End Court’s Jurisdiction

Posted by NCBRC - November 4, 2013

The BAP for the First Circuit determined that the bankruptcy court erred when it found that it lacked jurisdiction over a motion to avoid a lien under section 522(f). In re Rosado-Ramos, No. 13-5 (Oct. 22, 2013). In that case, the bankruptcy court dismissed the debtor’s adversary proceeding seeking to avoid the judicial lien on the debtor’s residence due to the fact that the trustee had abandoned the estate’s interest in the homestead. The bankruptcy court reasoned that it no longer had jurisdiction over the property because it was no longer part of the bankruptcy estate.

The BAP disagreed. Section 522(f) provides in part: “Notwithstanding any waiver of exemptions . . . , the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is . . . a judicial lien.” Taken in conjunction with section 1334(e)(1), which extends bankruptcy court jurisdiction to “all property, wherever located, of the debtor as of the commencement of such case, and of property of the estate,” the court found that the bankruptcy court’s jurisdiction over the property did not end when the trustee abandoned it. Thus, bankruptcy court’s additional requirement that the property be part of the bankruptcy estate was in error.

The BAP vacated the judgment and remanded the case to allow the bankruptcy court to address the debtor’s motion for lien avoidance under section 522(f) and the creditor’s defenses to that motion.

Rosado-Ramos opinion

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