624 B.R. 852
Bankr. S.D. Ind.2020Background
- Debtor filed Chapter 7 on Feb 9, 2018 and scheduled an Abilify class-action/product-liability claim at $0, disclosing it on Schedule A/B and at the §341 meeting.
- Trustee conducted inquiries (Rule 2004, requested medical releases, asked for law-firm name) and filed a Report of Possible Assets; clerk mailed a Rule 6007 notice proposing abandonment of all scheduled assets except oil-well interests, with an objection deadline of Oct 10, 2018; no objections were filed.
- Trustee later filed a report of no distribution; the case was closed and the docket showed abandonment of scheduled property. The debtor continued litigating the Abilify class action and obtained a settlement exceeding $229,000 in March 2020.
- Trustee moved to reopen the case and then moved to set aside the prior abandonment notation; the Court granted that motion on April 9, 2020. Trustee then employed special counsel and re-noticed the claim as an asset.
- Debtor moved under Fed. R. Bankr. P. 9024 (Rule 60(b) analog) to set aside the April 9 order revoking abandonment. The Court reviewed the §554/Rule 6007 framework, the §341 audio, and precedent, and granted the debtor’s motion, reinstating the earlier abandonment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the April 9, 2020 order (which set aside the trustee's prior abandonment) should be vacated under Rule 9024/60(b) | Debtor: he timely sought relief after learning of special-counsel employment, met Rule 60(b) standards, and has a meritorious defense | Trustee: debtor failed to timely object; trustee characterized the claim as an "undisclosed asset" warranting revocation | Court granted Rule 9024 relief and set aside April 9 order — debtor met thresholds and merits under Rule 60(b)(6) |
| Whether the Abilify claim was abandoned and, if so, under which §554 provision | Debtor: claim was abandoned via the trustee's Rule 6007/§554(a) notice (no timely objection) | Trustee: treated claim as not properly abandoned (argued §554(c) technical abandonment or undisclosed asset) | Court held abandonment occurred under §554(a) via the trustee's notice and lack of objection; not a §554(c) technical abandonment |
| Whether the debtor adequately scheduled the Abilify claim (inquiry notice) | Debtor: schedules plus §341 discussion (class action, Abilify side effects, counsel involvement) put trustee on inquiry notice | Trustee: debtor omitted material facts (retainer, representation agreement, scope of claims) and thus did not adequately disclose | Court found scheduling and §341 disclosures sufficient to put trustee on inquiry notice; trustee had opportunity to investigate and did so |
| Whether abandonment revocation is permissible given the general rule that §554(a)/(b) abandonments are strictly irrevocable | Debtor: strong policy of finality and narrow exceptions to revocation; no false/incomplete info that would justify revocation | Trustee: later settlement and asserted nondisclosure justify revocation to administer proceeds | Court applied precedent: absent incomplete/false information preventing trustee investigation, §554(a)/(b) abandonment is effectively irrevocable; revocation was improper |
Key Cases Cited
- Dewsnup v. Timm, 502 U.S. 410 (1992) (abandoned property revests in debtor and is treated as if no petition were filed)
- In re Woods, 173 F.3d 770 (10th Cir. 1999) (abandonments under §554(a) and (b) are generally irrevocable)
- Furlong, 660 F.3d 81 (1st Cir. 2011) (schedules need reasonable particularity to put trustee on inquiry notice)
- In re DeGroot, 484 B.R. 311 (B.A.P. 6th Cir. 2012) (discussing automatic/technical abandonment under §554(c))
- In re Adair, 253 B.R. 85 (B.A.P. 9th Cir. 2000) (scheduling descriptions that give inquiry notice defeat revocation even if value later increases)
- In re Wright, 566 B.R. 457 (B.A.P. 6th Cir. 2017) (denying trustee revocation of abandonment despite trustee’s later notation preserving claim)
- Catalano v. Commissioner, 279 F.3d 682 (9th Cir. 2002) (narrow exception permitting revocation where trustee was induced to forgo investigation by incomplete or false information)