For those who file or are contemplating filing a Chapter 7 Bankruptcy and own a home, it is important to know about a document which is termed a “Proposed Order of Abandonment.” For some reason, many bankruptcy practitioners fail to explain it and in some cases, even address this most important document. It is especially important for those filing who own a home and wish to keep or protect their home from the reaches of the bankruptcy trustee.
At the 341A hearing (also referred to as a 341A Meeting of Creditors) the assigned trustee will ask the debtor (the person(s) named in the filed petition) about their assets and liabilities which will include one’s home or other real property. Following the hearing, the trustee will determine if there are any assets which cannot be fully protected and thus be sold by the trustee. The proceeds of any such sale would then be distributed to the filing party’s creditors. This can and does include the potential forced sale of one’s home. Most, people, however do not wish to lose their home.
While many trustees will advise the individual(s) of their intent to “abandon” their interest in the home at the hearing, most will not. If the trustee does, in fact, wish to abandon his interest in the home, the trustee must file with the court a “Proposed Order of Abandonment.” This document is usually filed within a few weeks of the hearing date, up to as long as two months after the hearing date. A copy of this document will be mailed to all parties of interest including the individual(s) named in the petition.
The document will note the value of the property, the amount of all liens/mortgages against the property along with the amount of the bankruptcy exemption taken. Anyone who disagrees with the position of the trustee must file a written objection with the Clerk of the United States Bankruptcy Court at least seven (7) days before the scheduled hearing date. All abandonment notices will contain a specific hearing date/time on it in the event any objection is filed. In my twenty-plus years of bankruptcy practice, I have had only one (1) objection ever filed and the creditor objection went nowhere.
Accordingly, when one received such a notice in the mail it should be met with joy and happiness. Put another way, the trustee is walking away from any interest in the house and the home will once again be yours. Many people who have not been advised of this by their counsel interpret this document as the trustee advising them to abandon or leave their home. This, of course, could not be further from the truth.
Once the objection bar date passes the court clerk will author a Certification of No Objection. Your home is officially no longer “in play” and you can continue to live in it without fear of loss……. as long as you continue pay for it. There are no free rides in bankruptcy or in life.