566 B.R. 457
6th Cir. BAP2017Background
- Debtor filed Chapter 7 (Oct. 2010), listed a personal-injury suit against Simms on Schedule B (initially "unknown", later amended to $21,625) and did not list a BWC claim.
- Trustee filed a Notice of Assets and later employed special counsel to prosecute the personal-injury claim; NDR (Apr. 23, 2013) certified estate fully administered but stated the personal-injury settlement would "remain property of the bankruptcy estate" and the case would be reopened if proceeds emerged.
- Court entered a final decree closing the case on May 10, 2013; the decree did not expressly reserve either claim to the estate.
- Trustee reopened the case in 2015 after a settlement offer and moved to approve a global compromise ($180,000) covering both the Simms personal-injury claim and the related BWC claim; trustee proposed paying debtor $21,625.
- Debtor objected, arguing the trustee had abandoned the personal-injury claim at closing (and that the BWC claim belonged to him); bankruptcy court ruled the claims were not abandoned and approved the compromise without taking evidence.
- BAP: affirmed that the BWC claim was not abandoned, reversed the holding that the personal-injury claim was not abandoned, and reversed approval of the compromise.
Issues
| Issue | Debtor's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether the personal-injury claim was abandoned at case closing under 11 U.S.C. § 554(c) | Trustee’s NDR preserved the claim; not abandoned | NDR alone insufficient; only court may "order otherwise" to prevent statutory abandonment | Reversed: personal-injury claim was abandoned by operation of law under § 554(c) |
| Whether the unscheduled BWC claim was abandoned under § 554(d) | Failure to list is not fatal; debtor still entitled to claim | Unscheduled property is not abandoned at closing and remains estate property absent court order | Affirmed: bankruptcy court did not abuse discretion in finding BWC claim was not abandoned |
| Whether trustee could approve the global compromise including the personal-injury claim | Compromise invalid because trustee had abandoned the personal-injury claim; debtor’s objection not considered | Trustee had authority to settle estate claims; record and briefing sufficient | Reversed: trustee could not settle an abandoned claim; approval also reversed for lack of court findings on fairness |
Key Cases Cited
- Midland Asphalt Corp. v. United States, 489 U.S. 794 (U.S. 1989) (definition of a final order)
- Adam v. Itech Oil Co., 210 F.3d 573 (5th Cir. 2000) (order approving settlement is a final order)
- Woods v. Kenan (In re Woods), 173 F.3d 770 (10th Cir. 1999) (applying Rule 60(b)-style analysis to revocation of technical abandonment)
- LPP Mortg., Ltd. v. Brinley, 547 F.3d 643 (6th Cir. 2008) (approving application of Rule 60(b) approach and revocation standards)
- Vreugdenhill v. Navistar Int'l Transp. Corp., 950 F.2d 524 (8th Cir. 1991) (unscheduled property is not abandoned at case closing)
- Reynolds v. Comm'r, 861 F.2d 469 (6th Cir. 1988) (bankruptcy court must independently evaluate fairness of a proposed compromise)