I previously reviewed the case of In re Bast, ___ BR ___, 2007 WL 1429481 (Bkrtcy.S.D. Fla.)(Friedman, J.) where the court found that the requirements for a technical abandonment of certain non-exempt real property were met and that it was therefore abandoned from the estate to the debtor at the close of the case. The trustee’s subsequent efforts to administer the non-exempt real property for the benefit of the creditors were denied by the Court.
On August 8, 2007, the case of In re O’Neal, ___ B.R. ___, 2007 WL 2296450 (Bkrtcy.S.D.Fla.)(Friedman,J.) was issued. In this case a successor Chapter 7 trustee attempted to vitiate an abandonment by his predecessor of an interest in certain stock. The successor trustee’s Motion to Reopen the Case was granted and the trustee filed a Motion to Revoke Technical Abandonment. The court denied the Motion to Revoke Technical Abandonment as it held that a reopening of the case does not automatically revoke a technical abandonment and that there were otherwise no equitable circumstances for a revocation.
The Debtor’s chapter 7 case was filed and discharged as a “no asset” case. The Debtor had scheduled the stock in his schedule B with a value of $1. Apparently the stock was worth considerably more. The trustee claimed that the Debtor intentionally mislead him as to the value of the stock.
The court denied the trustee’s motion to revoke technical abandonment. The court noted that property which is not sold or otherwise administered during the bankruptcy case is deemed abandoned upon the closingn of the case. 11 USC 554(c). The court noted that the courts have disagreed about the effect of reopening a case when property was previously technically abandoned pursuant to Section 554(c). The court held that it disagreed with the cases that held that a reopening, if not limited, automatically revokes technical abandonment as this would eliminate the finality that Section 554(c) was intended to provide and would eliminate the incentive for the trustee to investigage estate assets carefully before closing a case.
The court held that although reopening does not automatically revoke the technical abandonment, that the court may order that property not be considered abandoned after a reopening based upon equitable circumstances, such as when misleading information was given to the trustee. The court held that this position is in accordance with the language in section 554(c) which provides “unless the court order otherwise…” which requires some cause for such an order which deviates from the norm of technical abandonment under section 554(c). The court noted that its view is essentially the same as that in In re Woods, 173 F.3d 770 (10th Cir.1999) which held that the reopening of a case does not automatically vitiate the abandonment of property under section 554(c), but that a court may under FRBP 9024 vacate the abandonment if the standards of that rule which are the equivalent of FRCP 60 are met.
