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In re Edwin Earl Elliott

Summarizing by Bradley Pearce

In re Donald and Jane Nichols

Summarizing by Lars Fuller

In re Stevens Opinion

Case Type:
Case Status:
BAP No. CC-19-1325-TaFL (9th Circuit, Jul 02,2020) Published
Adopting the majority position interpretation of 11 U.S.C. § 544(c), failing to include to include an asset on a debtor's schedules precludes an abandonment of such asset if it is not administered during the bankruptcy, notwithstanding disclosure of the asset on the Statement of Financial Affairs. The 9th Circuit BAP fails to acknowledge the majority position's problem arising from § 544(c)'s use of "schedule" as a verb, whereas "schedule" in § 521(a)(1)(B), relied upon in this opinion and the majority position, is a noun.
Procedural context:
The debtors disclosed the existence of a prepetition lawsuit in their Statement of Financial Affairs, but not their Schedules. They provided copies of the pleadings to the Chapter 7 trustee ("Trustee"). The Trustee elected not to administer the lawsuit, and filed a "no asset" report. The chapter 7 case was closed. After learning the lawsuit might have value, the bankruptcy court reopened the case on the Trustee's motion. The bankruptcy court also approved the Trustee's motion to administer and settle the lawsuit and the underlying claims. The debtors appealed.
Before their Chapter 7 case was closed, debtors disclosed a civil suit in their statement of financial affairs but not in their schedule of assets and liabilities. The debtors provided the chapter 7 trustee ("Trustee") with copies of the pleadings in the lawsuit, but never amended their schedules. The Trustee filed a "no asset" report, and reported that the abandoned assets had no value. The bankruptcy court discharged the Trustee and closed the case without administering the lawsuit and its claims. The debtors continued to prosecute the lawsuit. Shortly before summary judgment, the defendant approached the Trustee with a settlement. The Trustee withdrew the "no asset" report and filed a motion to reopen the chapter 7 case. The debtors opposed, arguing that the Trustee had abandoned the property under 11 U.S.C. § 544(c). The chapter 7 case was reopened, and the Trustee approved a settlement that resolved the civil suit and the underlying claims. The debtors appealed.
TAYLOR, FARIS, and LAFFERTY, Bankruptcy Judges

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