Learning About Bankruptcy

Posted on: 10 August 2022

Most people have heard of abandoned property regarding goods left at storage facilities. However, this term may also apply to those filing chapter 7. Read on to find out what is meant by abandoned bankruptcy property.

Chapter 7 Liquidation

Most chapter 7 filers are protected against property seizures with exemptions. However, some filers could end up with non-exempt property. The trustee may seize property with the intention of selling it and then using the proceeds to pay certain expenses. The money might go for things like bankruptcy administrative costs and the trustee's salary. Beyond exemptions, another issue is that the property seized may not be the money-maker the trustee would hope for. Here are a few issues with selling seized property that could result in a return of the property to the filer.

Values Are Tricky 

Although trustees can always call in a professional appraiser, the expense of doing so is considerable. When you consider the things a typical filer owns, much of it is used. Used clothing, furniture, tools, and other things are seldom seized because there is almost no value in them.

On the other hand, used vehicles, jewelry, and real estate tend to hold their value better and these may be the target of the trustee unless they are protected by an exemption. For instance, many states allow filers to keep their heirloom jewelry, work tools, vehicles, and a primary family residence.

Selling Costs Money

In many cases, the items seized by the trustee come along with expenses. Homes, when seized, may not be in good condition and must be sold "as-is". The expenses associated with selling property are part of the equation the trustee is expected to perform before they take ownership of an item of personal property. In many cases, homes seized through bankruptcy cannot be sold because they contain asbestos or have other expensive problems.

Property Liens

When a property has a lien on it, it's frozen. No one, including the bankruptcy trustee, can sell the property. Liens may be placed by almost anyone, from judges in personal injury cases to the IRS. Since the lien must be satisfied to sell the property, the trustee may abandon the home.

Talk to your bankruptcy lawyer about abandoned property issues. Filers can request that property be abandoned by the trustee if they have good reasons for doing so. Once a property has been abandoned by the bankruptcy trustee, it reverts to the previous owners – the filers.

Find out more by speaking to a bankruptcy lawyer, such as Alan G. Seligson PC.