In re Wright

Summarized by Thomas DeCarlo , John Steinberger & Associates, PC
8 years 10 months ago

Case Type:

Consumer

Case Status:

Affirmed in part and Reversed in part

Citation:

16-8019, 2017 WL 1371293 (6th Circuit, Apr 17,2017) Published

Tag(s):

Ruling:

Property listed in schedules and not administered before case is closed is abandoned to the debtor and is not subject to later administration. Property that is not listed in schedules is not abandoned at case closing even if Trustee had actual knowledge of undisclosed asset.

Procedural context:

Trustee filed Motion to Reopen Chapter 7 case to administer a personal injury case and a workers compensation claim. Bankruptcy Court granted Motion and authorized trustee to administer for benefit of estate. On appeal, Sixth Circuit BAP reversed as to personal injury action as closing of case operated as technical abandonment; but affirmed as to workers compensation claim that was not technically abandoned.

Facts:

Debtor's schedules listed a pending personal injury action but did not disclose a pending claim for workers compensation. Trustee administered estate and filed Report of No Distribution that stated, "The [personal injury] settlement shall remain property of the bankruptcy estate upon the entry of a final decree; if money becomes available to creditors from this asset, the case will be re-opened and trustee will be appointed to administer the asset." Two years later, the defendant in the personal injury case made an offer of settlement and the Chapter 7 Trustee sought to reopen the case to settle the litigation and administer the proceeds. The Bankruptcy Court held that while the case was closed without the asset being administered, the Trustee's "reservation" language allowed the Trustee to reopen the case and settle the litigation. The BAP disagreed, holding that when an asset is scheduled and not administered, then closing of the case abandons the asset for all purposes. The BAP noted that Section 554 allows the Court to order otherwise, but the Trustee never asked for a judicial ruling to retain the asset as property of the estate and the declaration of the Trustee is not on "order" that can prevent abandonment. As to workers compensation claim, however, the debtor did not schedule that claim. Although at some point during the case the Trustee learned of the claim, the debtor did not amend the schedules. Closing of the case did not operate to abandon this asset as Section 554 is limited to assets that are scheduled. Bankruptcy Court's holding that case could be reopened for purposes of allowing the Trustee to administer this claim affirmed by BAP.

Judge(s):

Harrison, Preston and Wise

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!