In re Hsin-Shawn Cyndi Sheng

Case Type:
Case Status:
BAP No. EC-19-1317-TLS (9th Circuit, Nov 05,2020) Not Published
The Ninth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court's decision to award an administrative expense claim to the tenant of the individual chapter 7 debtor after the trustee had filed a motion to abandon the security deposit.
Procedural context:
The chapter 7 trustee filed a motion to abandon a security deposit sought by the debtor's residential tenant. Because the debtor had dissipated the deposit, the court considered the request as one for an administrative expense claim. Debtor did not file a written opposition but her attorney appeared at the hearing to oppose the motion. The bankruptcy court awarded the tenant an administrative expense claim, and the debtor appealed.
After the debtor's chapter 13 case was converted to chapter 7, she entered into an unauthorized lease of residential real property. The trustee reached an agreement with the tenant to allow the tenant to continue to occupy the property. Subsequently, the trustee abandoned the property, apparently because there were sufficient funds to pay administrative expense claims and unsecured claims in full without the property. The tenant sought return of the $3,500 security deposit from the debtor, who refused and told her to request it from the trustee. The trustee sought to abandon the security deposit to the tenant, but the court considered the request as one for an administrative expense claim because debtor had dissipated the security deposit. The bankruptcy court approved the allowance and payment of the security deposit as an administrative expense claim over debtor's objection, as the lease had benefitted the estate and the trustee had enough funds to pay the claim even after payment of other administrative expense claims and unsecured claims. The BAP also rejected the debtor's claim that the bankruptcy court was biased against her.

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