Notice of Abandonment Not Required under 554(c)

Posted by NCBRC - June 7, 2016

Where the debtor’s asset was included in his chapter 7 schedules, the trustee certified in his Final Report that the estate had been fully administered, and the case was closed, the asset was abandoned. In re Robertson, 2016 Bankr. LEXIS 931, No. 14-20984 (Bankr. D. Utah, March 24, 2016).

Michael Lynn Robertson listed his breach of contract claim against Banner Bank (successor to Far West Bank) on his schedules when he filed for chapter 7 bankruptcy. The trustee communicated with counsel for both Mr. Robertson and Banner Bank but neither the trustee nor the Bank took any action with respect to the claim. The trustee filed his Report of No Distribution and the court closed the case, both actions accomplished by text entry.

The state court of appeals then suspended the ongoing appeal of the contract case to seek a ruling by the bankruptcy court as to whether the appeal was an asset of the bankruptcy estate or had been abandoned to the debtor. Mr. Robertson moved the bankruptcy court for an order declaring the asset abandoned pursuant to section 554(c). The Bank objected on the ground that the trustee’s Notice and Report of No Distribution did not comply with the requirements of section 554(a) and Bankruptcy Rule 6007. The court agreed that the case was not abandoned under section 554(a) but found that it was abandoned under section 554(c).

Unlike subsections 554(a) and (b), which provide for abandonment of an asset after notice and a hearing, subsection 554(c) does not include a notice and hearing requirement. Likewise, the notice requirements in Rules 6007 and 9013 apply only where the proposed abandonment is pursuant to subsection (a) or (b). Under section 554(c) the only requirements for abandonment are that the asset be listed in the bankruptcy schedules and that it not be administered at the time the case is closed. So long as the trustee complies with his duties under section 704(9) and Bankruptcy Rules 5009 and 2002(f)(8), the requirements of section 554(c) are satisfied. Under Rule 5009(a) the trustee is obligated to file the report of final distribution and the parties then have thirty days within which to object. Under Rule 2002(f)(8), notice to creditors is required only where the net proceeds from the estate are more than $1,500.00. Where there is no distribution, there is also no requirement of notice to creditors. Under the holding in In re Woods, 173 F.3d 770 (10th Cir. 1999), technical abandonment under section 554(c) occurs when the case is closed without administration of an asset.

Even if notice were required, however, the court found the text entry of its closing order complied with Rule 5005(a)(2), was received by counsel for the Bank, and was, therefore, adequate notice.

Robertson Bankr Utah March 2016 opinion


Post a Comment

You must be logged in to post a comment.