In a recent ruling, the Bankruptcy Court for the Southern District of Georgia denied the Trustee’s motion to reopen a case so that he could sell debtor’s unexempt property to create a fund from which to pay creditors. (In re Fauvie, 2017 BL 212714, Bankr. S.D. Ga., 15-40635-EJC, 6/21/17).
Overview of the Case Facts
Keith A. Fauvie (the “Debtor”) filed for Chapter 7 bankruptcy on May 1, 2015. In his bankruptcy schedules, he listed two assets that were not fully exempt: a 1978 Chevrolet Corvette valued at $9,000 (less a $1,500 exemption claimed by Debtor) and a 2003 Stingray CS 220 boat valued at $9,100. (Id. 2) The Chapter 7 Trustee, James L. Drake, Jr. (“Trustee”) seized the Corvette and the boat. He hired Mike Bohannon to sell the assets.
Debtor received his bankruptcy discharge on September 14, 2015. (Id. 3). The Trustee then filed his Chapter 7 Trustee’s Report of No Distribution on January 12, 2016, and on February 12, 2016, the Court closed the case and discharged the Trustee from his duties in the case (Id. 4).
Then, over a year after the case was closed, on May 2, 2017, the Trustee filed this Motion to Reopen “asking the Court to reopen the Debtor’s case and set aside his Report of No Distribution so that he may sell the Debtor’s Corvette and the Stingray boat.” (Id.) The Trustee claimed that he “attempted unsuccessfully” to sell the items before the case was closed, but he now has received cash offers to purchase both assets. (Id.)
Since the Trustee seized the Corvette and boat, Bahannon has remained in possession of the property.
Overview of The Bankruptcy Court’s Ruling
Bankruptcy Courts are authorized to reopen cases “to administer assets, to accord relief to the debtor or for other cause” pursuant to Section 350(b) of the Bankruptcy Code. 11 U.S.C. §350(b).
While the Court has broad discretion on when it may reopen a case, there is some disagreement among the Courts “as to whether a case may be reopened to allow for the administration of assets that have been previously abandoned[.]” (Id. 6)
The general view is that abandonment is irrevocable; however, the Court notes two exceptions to the rule of irrevocable abandonment:
- “A case may be reopened to administer an asset that was unknown to the trustee.” (Id.)
- “The abandonment of a disclosed asset may be revoked where disclosure of the asset was incomplete or misleading.” (Id. 7)
The Court found that neither of these two exceptions were applicable in this case. The Trustee took possession of the items during the Debtor’s bankruptcy, so he had knowledge of their existence and an opportunity to administer the assets prior to filing his Report of No Distribution. Also, in this case, the Court found no evidence to suggest that the Debtor’s disclosure of the assets was incomplete or misleading. (Id.)
The Court denied the Trustee’s motion and stated it “will not allow the Trustee to reopen this case to administer assets that he abandoned over a year ago after he was unable to sell them during the pendency of the Debtor’s case.” (Id.)
The Court notes that the Corvette and the boat should have been “made available to the Debtor,” meaning the items should have been given back to the Debtor after his case was closed. (Id. 5, FN 8) Mr. Fauvie has the right to get his belongings back.
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