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Fields v. Bleiman

267 Fed.Appx. 144 (3rd Cir. 2008)

FORECLOSURE; BANKRUPTCY; AUTOMATIC STAY — Once a bankruptcy trustee abandons a property, the real property, as of the date the abandonment becomes effective, is no longer property of the bankrupt estate and, accordingly, the automatic stay does not apply to it, such that a foreclosure proceeding can proceed.

In a Chapter 7 bankruptcy proceeding, the trustee abandoned the debtor’s residence “because of it was of inconsequential value to the bankrupt estate.” After the abandonment became effective, the trustee entered a report of no distribution, “noting that he did not receive any property or pay any money on account of the bankruptcy estate except exempt property and that he had found no property available for distribution on the estate.” A bankruptcy discharge was filed and the estate was considered fully administered. After the abandonment, but before the discharge, a mortgagee initiated foreclosure proceedings. After the bankruptcy discharge was issued, the debtor filed a motion to reopen the case, complaining that the foreclosing mortgagee had violated the automatic stay provisions of the Bankruptcy Code. The Bankruptcy Court reopened the matter, but denied the motion. It also denied a motion for reconsideration. The debtor appealed to the District Court, but again unsuccessfully. He filed a motion for reconsideration, which the District Court denied. He then appealed. The Court of Appeals was “[i]n complete agreement with the District Court’s analysis of the Bankruptcy Court’s decisions.” According to the Court, “the bankruptcy trustee abandoned the property [and when] the abandonment became effective, the real property was no longer property of the bankrupt estate. ... Accordingly, the automatic stay did not apply” to the property.

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