Abandonment of Property in a Chapter 7 Bankruptcy is a Good Thing

A Chapter 7 Bankruptcy client from Mount Laurel New Jersey called the other day concerned he was going to lose his house. He had received a Notice of Abandonment relating to his house and was not sure what it meant. I explained that when a person files a Chapter 7 bankruptcy, the trustee appointed in the case in effect gets an ownership interest in the individual's property. This would allow the trustee to sell the property, but only in the unusual circumstance where there is a lot of equity in the house. Since individuals can protect some equity in their home, in most Chapter 7's the trustee will decide there is no benefit to the creditors to sell the home because after paying the realtor, the mortgage and allowing the debtor approximately $24,000 in equity ($48,000 if jointly owned) there is no reason to sell the home. So the Trustee will send out a Notice that he is abandoning "his" interest in the property, not "yours". It is understandble why receiving a notice for abandonment would seem like a problem, but it is not.

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