Kentucky Bankruptcy Law

Counsel with Care

When “abandonment” is a good thing

Despite my reassurances, debtors always have anxiety about the meeting of creditors. When the 5 to 10 minutes that the meeting takes have passed, they are invariably relieved. Bu, then the trustee often says something that perplexes them. He or she says, “I am going to abandon the estate’s interest in…”.

Abandonment sounds like a bad thing and usually it is. But, in bankruptcy it is a good thing. When the bankruptcy is filed, all the property of the debtor goes into an estate. The trustee has control over that estate. He or she can liquidate non-exempt assets of the estate; sell them and distribute the cash to creditors. For nearly all of my clients, all assets are exempted under the more generous Federal exemptions. When this is the case, then the trustee has nothing they can liquidate which would realize money for the creditors.

For any asset that is fully exempt or of no value to the estate, then the trustee will abandon that asset. That means he or she relinquished the ability to control or sell the property. So, in bankruptcy abandonment is a good thing.

May 15, 2013 - Posted by | Bankruptcy, Chapter 7, The estate | , , , ,

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