The Sixth Circuit affirmed a Tennessee bankruptcy court decision recently which required a chapter 7 trustee to abandon his interest in the debtors’ homestead, on debtors’ motion, where the property had an appraised value of $108,000.00 and secured claims against it of $91,581.00.
The trustee argued that the debtors’ could not file a motion to abandon property because they were not “parties in interest” and because he had already tendered their homestead exemption ($7500.00 for Tennessee residents). The court rejected the trustee’s standing argument finding that they had “as practical a stake in the outcome” as any other party and because 11 USC §554(b) allows for abandonment of property that is of inconsequential value to the estate.
The trustee’s tender of the homestead exemption did not advance the trustee’s position, according to the court. The debtors have more than one remedy when faced with a trustee seeking to administer an asset of the estate: accept the exemption or move to compel abandonment. In this case, the debtors chose to compel the abandonment and were able to prove to the court that their home had no equity for the benefit of unsecured creditors.
Content written by: PJ Minnillo