Concenpt of Abandonment of Property in Bankruptcy


Abandonment of the property is one of the most commonly misunderstood concept under bankruptcy. An abandonment is based on three interests when someone files bankruptcy petition. It affects the following interests

– Lienholder’s interst,
-the debtor’s exemption interest,
-estate’s interest in any remaining equity.
Let us say if a debtor owns a home worth $200,000 subject to the consensual lien of $50,000.00. Before bankruptcy, there are only two interest in the property –the lienholder’s and the owners’. On filing bankruptcy, the estate’s interest also become part of the lien into this equation. There are now three entities who has a relative interest in the property. The bankruptcy Code authorizes the trustee to abandon estate property that is “burdensome to the estate or of inconsequential value and benefit to the estate”. The estate can relinquish its claims –which in other words is called abandonment. When trustee finds out nothing but problem, and again trustee are to make quick money on the estate and they are really not in the business of property management or being auctioneers.

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