312-263-2200

Bankruptcy Code Section 554(a) permits the trustee to abandon estate property upon a showing that it is either burdensome, or of an inconsequential value and benefit to the estate.  Abandonment can also occur under Section 554(c) if property of the estate is properly scheduled by a debtor but not administered by the trustee by the time the case is closed.  In re Tadayon, 2019 WL 1923044 (9th Cir. BAP, April 29, 2019), noted that a split existed among the courts on the question of whether a debtor’s disclosure of an asset in the Statement of Financial Affairs (“SOFA”), but not in the Schedules of Assets and Liabilities, precludes abandonment under Section 554(c).

Tadayon cited to the following courts as having taken a strict approach, determining that the word “scheduled” in Section 554(c) has been given a specific meaning in Section 521(a)(1), and refers only to assets listed in the debtor’s Schedules of Assets and Liabilities. See, In re Medley, 29 B.R. 84, 86 (Bankr. M.D.Tenn. 1983); In re Harris, 32 B.R. 125, 127 (Bankr. S.D.Fla. 1983) (reference to partnership in SOFA was insufficient to schedule debtor’s interest in mortgages held by partnership); In re Schmid, 54 B.R. 78, 80 (Bankr. D.Or. 1985) (no abandonment where debtor made ambiguous disclosures in SOFA and schedules, and concealed information about the lawsuit from trustee at the Section 341(a) meeting of creditors); Swindle v. Fossey (In re Fossey), 119 B.R. 268, 272 (D.Utah 1990) (cause of action listed in debtor’s SOFA, but not in schedules, was not “scheduled” under Section 521(a)(1) and thus was not abandoned under Section 554(c)); In re McCoy, 139 B.R. 430, 431 (Bankr. S.D.Ohio 1991) (no abandonment despite trustee’s knowledge of the asset since debtor did not list it in her schedules); In re Winburn, 167 B.R. 673, 676 (Bankr. N.D.Fla. 1993) (cause of action listed only in debtor’s amended SOFA filed one year into bankruptcy case and never disclosed in schedules was not abandoned under Section 554(c), regardless of trustee’s or any creditor’s knowledge of the asset before the case closed).

Tadayon cited to the following courts as having not been as strict in interpreting the meaning of “scheduled” in Section 554(c), holding that assets are scheduled if listed in the SOFA. See, In re Hill, 195 B.R. 147, 150-51 (Bankr. D.N.M. 1996) (holding that prepetition lawsuit listed on SOFA but not on schedules was abandoned upon closure of the case, given that trustee was aware of the lawsuit, had inquired about it at the Section 341(a) meeting of creditors, and had demonstrated an intent to abandon it in his Report of No Distribution and Notice of Abandonment of Assets); U.S. ex. rel. Fortenberry v. The Holloway Grp., Inc., 515 B.R. 827, 829 (W.D. Okla. 2014) (holding that the word “scheduled” in Section 544(c) refers to both the SOFA and Schedules of Assets and Liabilities; debtor’s disclosure of lawsuit only in his SOFA satisfied Section 554(c) and was abandoned when case closed).

Tadayon followed the latter line of cases.  However, its facts were unique, as noted in the following explanation:

Regardless of whether [debtor] had to list the State Court Action in his Schedule B for it to be deemed abandoned under §554(c) when his case closed, or whether listing it in the SOFA was enough for that purpose, the trustee here filed a notice of intent to abandon, stating that the asset was burdensome and of inconsequential value to the estate.  Trustee Rosenberg questioned [debtor] about the State Court Action at the §341(a) meeting of creditors.  Although Dr. Nasseri asserts that [debtor] was not truthful about what claims were being litigated or the value of the asset, nothing in the record supports this.  What we do know is that Trustee Rosenberg conducted an investigation into the State Court Action before making the deliberate decision to abandon it from the estate. Despite the lack of an order, Trustee Rosenberg’s intent to abandon the State Court Action was clear and unequivocal.  The entire question of “scheduled” property becomes academic where, as here, the Abandonment Notice specifically abandoned the State Court Action.  Trustee Rosenberg’s final report, stating that all scheduled and known assets had been or would be abandoned, is further evidence of his intent to abandon it.

Therefore, under these facts, we conclude that the requirements for abandonment under §554(c) were met and that the State Court Action was abandoned to [debtor] in 2012.

Id. at *6-7.

 

Matthew T. Gensburg
mgensburg@gcklegal.com