304 B.R. 59, 50 Collier Bankr.Cas.2d 274

       United States Bankruptcy Court, E.D. New York. In re Frederick

    SCHOENEWERK and Lorrie A. Schoenewerk d/b/a Collision Concepts Corp.

    d/b/a Olympic Collision Corp., Debtors. No. 802-82063-288. June 16,

                                   2003.



Background: Chapter 7 debtors moved for expedited determination that

trustee had abandoned, or could be deemed to have abandoned, estate's

interest in debtors' interest in their residence.



Holding: The Bankruptcy Court, Stan Bernstein, J., held that trustee,

by filing no-asset report in reliance upon debtors' valuation of

residence at amount only a few thousand dollars in excess of mortgage

indebtedness, did not thereby abandon residence as asset of estate.



So ordered.



                               West Headnotes



[1] KeyCite Notes Link to KeyCite Notes



Key Number graphic 51 Bankruptcy

  Key Number graphic 51IX Administration

    Key Number graphic 51IX(D) Abandonment

      Key Number graphic 51k3131 k. In General. Most Cited Cases



Chapter 7 trustee, by filing no-asset report in reliance upon

debtors' valuation of residence at amount only a few thousand dollars

in excess of mortgage indebtedness, did not thereby abandon residence

as asset of estate, where trustee never filed motion to abandon, and

case had not been closed. Bankr.Code, 11 U.S.C.A. § 554.



[2] KeyCite Notes Link to KeyCite Notes



Key Number graphic 51 Bankruptcy

  Key Number graphic 51VIII Trustees

    Key Number graphic 51k3008 Powers, Duties and Fiduciary Capacity

      Key Number graphic 51k3009 k. Representation of Debtor, Estate,

or Creditors. Most Cited Cases



Chapter 7 trustee bears responsibility of determining if and how to

dispose of property of the estate. Bankr.Code, 11 U.S.C.A. § 725.



[3] KeyCite Notes Link to KeyCite Notes



Key Number graphic 51 Bankruptcy

  Key Number graphic 51IX Administration

    Key Number graphic 51IX(D) Abandonment

      Key Number graphic 51k3136 k. Revocation. Most Cited Cases



Even an asset, formally abandoned, may be reclaimed by Chapter 7

trustee for benefit of creditors; abandonment may be revoked, if

debtor concealed information from trustee, or if trustee did not

possess sufficient information. Bankr.Code, 11 U.S.C.A. § 554.



[4] KeyCite Notes Link to KeyCite Notes



Key Number graphic 51 Bankruptcy

  Key Number graphic 51IX Administration

    Key Number graphic 51IX(D) Abandonment

      Key Number graphic 51k3131 k. In General. Most Cited Cases



Failure to pursue particular claim by trustee does not amount to

abandonment of that claim. Bankr.Code, 11 U.S.C.A. § 554.



[5] KeyCite Notes Link to KeyCite Notes



Key Number graphic 51 Bankruptcy

  Key Number graphic 51VIII Trustees

    Key Number graphic 51k3011 k. Liabilities in General; Accounting.

Most Cited Cases



Key Number graphic 51 Bankruptcy KeyCite Notes Link to KeyCite Notes

  Key Number graphic 51XI Liquidation, Distribution, and Closing

    Key Number graphic 51k3441 k. In General. Most Cited Cases



Bankruptcy Rule providing that if Chapter 7 trustee files final

report and account and certifies to court that estate is fully

administered, and if no party objects within 30 days, then there

shall be presumption that estate is fully administered serves

bureaucratic function of eliminating need for preparation of report

by United States Trustee advising bankruptcy clerk of need to close

cases, and should not be construed as granting any substantive right

or interest to debtor in any property that comes into estate upon

filing of petition by operation of law. Fed.Rules Bankr.Proc.Rule

5009, 11 U.S.C.A.



[6] KeyCite Notes Link to KeyCite Notes



Key Number graphic 51 Bankruptcy

  Key Number graphic 51VIII Trustees

    Key Number graphic 51k3011 k. Liabilities in General; Accounting.

Most Cited Cases



Bankruptcy Rule providing that if Chapter 7 trustee files final

report and account and certifies to court that estate is fully

administered, and if no party objects within 30 days, then there

shall be presumption that estate is fully administered created only a

rebuttable presumption, which trustee rebutted by averring that, in

filing no-asset report, he relied on debtors' valuation of their

residence at amount only a few thousand dollars in excess of mortgage

indebtedness, and that, in light of debtors' listing of property for

sale at amount substantially in excess of value specified on

schedules, he was obliged to withdraw his no-asset report and to

administer asset in question. Fed.Rules Bankr.Proc.Rule 5009, 11

U.S.C.A.



 [7] KeyCite Notes Link to KeyCite Notes



Key Number graphic 51 Bankruptcy

  Key Number graphic 51II Courts; Proceedings in General

    Key Number graphic 51II(A) In General

      Key Number graphic 51k2127 Procedure

        Key Number graphic 51k2129 k. Rules. Most Cited Cases



Federal Rules of Bankruptcy Procedure cannot be construed to trump

substantive provision of the Bankruptcy Code. Bankr.Code, 11 U.S.C.A.

§ 101 et seq.; Fed.Rules Bankr.Proc.Rule 1001 et seq., 11 U.S.C.A.

*60 Jerome Lee Davidow, New York City, for Debtors.

Kirschenbaum & Kirschenbaum, Garden City, NY, for Trustee.



                                   Issue:



STAN BERNSTEIN, Bankruptcy Judge.

On June 5, 2003, Frederick and Lorrie A. Schoenewerk (debtors) filed

a motion for an expedited determination that Kenneth Kirschenbaum,

Esq., the chapter 7 trustee (trustee), has abandoned or can be deemed

to have abandoned the estate's interest in the debtor's interest in

their residence located at 255 Locust Drive, Rocky Point, N.Y. 11788

(property). In reply, the trustee has objected to the motion;

therefore, the burden of proof shifts back to the moving party. Upon

reviewing the pleadings and the docket of this Court, the Court has

decided to deny the debtors' motion without hearing because it is

entirely without merit on its face.

                                Discussion:

[1] Link to KeyCite Notes On March 25, 2002 (Petition Date), the

debtors filed a joint petition for relief under chapter 7 of the

Bankruptcy Code. In their schedules of assets and liabilities, they

stated under oath that the fair market value of their primary

residence was $140,000, subject to a first mortgage indebtedness of

$123,593. The debtors also claimed a joint household exemption of

$20,000. The debtors' valuation of their residence was allegedly

corroborated by a "market survey" prepared by a licensed real estate

broker, which is attached to their motion. The broker placed a value

on the property of between $145,000 and $155,000. The debtors allege

that they mailed the trustee a copy of the broker's price opinion,

including the data on comparable sales allegedly supporting the

opinion. They also point out that the trustee had a full opportunity

to examine the debtors under oath at the section 341 meeting of

creditors, and they fully co-operated in responding to any of his

concerns. The debtors further allege that the trustee was apparently

satisfied that there was no material benefit to be gained by the

trustee's selling their residence through a broker, and that his

filing of a No-Asset Report (NDR) can only be deemed to be an

abandonment of the estate's interest in their interest in the

residence. Moreover, the debtors allege that they had a right to rely

upon the trustee's "implied abandonment" and that their reliance is

evidenced by the fact that they have listed the property for sale

with a local real estate broker.

[2] Link to KeyCite Notes During cross-examination at an evidentiary

hearing held on the record on May 30, 2003, Mr. Schoenewerk admitted

that he and his wife had listed their residence for sale through a

broker at an asking price of $249,900. [FN1] Indeed, recovering that

equity for himself was the primary strategic goal of the individual

creditor, Horst Klausing, who filed the complaint on June 28, 2002

that led to the trial on May 30, 2003. When the trustee learned of

the listing agreement and the asking price, which had now become a

matter of public record; his counsel sent a formal letter to the

debtors' *61 counsel, notifying the debtors that the trustee was

withdrawing his no-asset report, [FN2] that they were precluded from

continuing to list their residence for sale with an unauthorized

broker, and that the debtors' nonexempt interest in the property

remained vested in the trustee by operation of law. [FN3]



      FN1. The asking price was originally $265,000.







      FN2. The Rescission was filed by the trustee on June 5,

      2003 and the Trustee's Notice of Assets and Request for

      Notice to Creditors was filed the same date. Proof of

      claims are now due by September 3, 2003.







      FN3. Under section 725 of the Bankruptcy Code, the

      trustee bears the responsibility of determining if and

      how to dispose of property of the estate.







As his entire legal authority, the debtors' counsel relied wholly on

just one opinion from another bankruptcy judge in this district that

by filing a no-asset report, the trustee can be deemed to have

abandoned any interest of the estate in the debtor's interest in real

or personal property. In re Ozer, 208 B.R. 630 (Bankr.E.D.N.Y.1997).

Any opinion issued by a colleague of this judge would ordinarily be

entitled to very serious consideration out of respect to one's peers.

However, the salient fact is the decision was reversed by the

district court, Mendelsohn v. Ozer (In re Ozer), 241 B.R. 503

(E.D.N.Y.1997). [FN4] Moreover, as the trustee points out in his

responsive memorandum, the posture of the Schoenewerk case makes it

far easier to decide the contested matter in favor of the trustee. In

the Ozer case, the Clerk of the Court had already closed the chapter

7 estate, and it took the trustee a full eighteen months before

filing his motion to reopen the closed case. That motion was denied

by the Bankruptcy Court within the exercise of her discretion, but

later reversed as an abuse of discretion.



      FN4. This case was cited in In re Sweeney, 275 B.R. 730,

      735 (Bankr.W.D.Pa.2002); See also In re Alcorn, 252 B.R.

      174, 178 (Bankr.D.Colo.2000) ("the Court would have

      little hesitation to reopen a case for the administration

      of assets or value discovered after it had been hidden,

      omitted, obfuscated, or was otherwise the product of

      fraud, deceit or Debtors' wrongdoing"); In re

      Winebrenner, 170 B.R. 878, 882 (Bankr.E.D.Va.1994)

      ("Administering undisclosed assets has been frequently

      held sufficient cause to reopen a bankruptcy case.")







This case, as the trustee points out, has not been closed. The status

of the case remains open, not due to any "mistake or inadvertence" of

the Clerk's office, as alleged by the debtors' counsel; quite to the

contrary, the Clerk's standard protocol is not to close any chapter 7

case until at least ten days beyond the date until (i) the Bankruptcy

Court has determined every complaint filed under section 727(a) or

under section 523(a) and/or (ii) every appeal to the district court

or to the Court of Appeals of any judgment or order of a bankruptcy

judge in this district is finally concluded. [FN5]



      FN5. The debtors' counsel could have ascertained this

      protocol in a two-minute phone call to the Clerk's

      office, but he preferred to speculate about the reasons

      for this case's remaining open (at the cost of

      denigrating the Clerk's office) rather engaging in the

      most minimal form of due diligence required under Fed. R.

      Bankr.P. 9011 before signing his name to a pleading.







[3] Link to KeyCite Notes Section 554(a) expressly authorizes the

trustee to file a motion on notice and hearing to abandon any

nonexempt asset that is burdensome or inconsequential value or

benefit to the estate. Here the trustee did not so move, so section

(a) is inapplicable. [FN6] Section 554(b) authorizes a *62 party in

interest to file a motion on notice and hearing for the Court, in the

exercise of its discretion, to order the trustee to abandon any asset

that meets the criteria set forth in subsection 554(b). Even assuming

that the debtors' pending motion should be deemed to fall under

section (b), although it is not pled in those terms, section (b)

would not be applicable because the debtors claim that there is

substantial value in the nonexempt equity in their residence.

Subsection (c) provides that unless the court orders otherwise, any

property that is scheduled by the debtors "not otherwise administered

at the time of the closing of a case is abandoned to the debtor ..."

This subsection also does not apply because the case has not been

closed.



      FN6. And even an asset, formally abandoned, may be

      reclaimed by the chapter 7 trustee for the benefit of

      creditors. "Abandonment may be revoked, however, if the

      debtor concealed information from the trustee, or if the

      trustee did not possess sufficient information about the

      claim." In re Lintz W. Side Lumber, Inc., 655 F.2d 786,

      791-792 (7th Cir.1981).







[4] Link to KeyCite Notes If Congress intended to treat the filing of

a no-asset report as a dispositive legal event with respect to any

abandonment issue, it could have so provided, but it did not, and no

negative inference may be drawn from the structure of this subsection

to support the debtors' position. [FN7] Indeed, subsection (d) makes

the redundant point, to avoid any misunderstanding on anybody's part,

that "Unless the court orders otherwise, property of the estate that

is not abandoned under this section and that is not administered in

this case remains property of the estate." Thus, on this narrow legal

issue, the debtors have completely ignored the plain language of the

Code that requires either an affirmative act of the trustee to

abandon an asset of the estate under subsection (a) or an implied act

of the trustee to abandon an asset that is not administered, which

becomes effective only upon the closing of the case.



      FN7. "A failure to pursue a particular claim by a trustee

      ... does not amount to abandonment of the claim." In re

      Eagle Enters., 265 B.R. 671, 679 (E.D.Pa.2001); In Polvay

      v. B.O. Acquisitions (In re Betty Owens Sch.), 1997 WL

      188127, *3, 1997 U.S. Dist. LEXIS 5877, *9

      (S.D.N.Y.1997), the court stated that "... inaction

      alone, ... is insufficient to constitute a section 554(a)

      abandonment."







[5] Link to KeyCite Notes In further support of their argument, the

debtors refer to Fed. R. Bankr.P. 5009, which provides, in relevant

part:

If in a chapter 7 ... case the trustee has filed a final report and a

final account and has certified that the estate has been fully

administered, and if within 30 days no objection has been filed by

the United States trustee or a party in interest, there shall be a

presumption that the estate has been fully administered. (Emphasis

added)

The debtors cited no case construing this Rule and have failed

completely to understand the purport of this Rule. First of all, Rule

5009 does nothing other than to restate section 350(a), to add a

minor modification to specify a thirty-day period during which the

United States trustee or any party in interest may file an objection

to close a case, and to add a presumption that the estate has been

fully administered if no timely objection is filed.

To see this Rule in context, one has to step back and understand that

one of the reforms under the Bankruptcy Code, as enacted in 1978, was

intended to relieve bankruptcy judges of the heavy burden of case

administration in its most routine and tedious bureaucratic aspects,

including the actual issuance of orders closing chapter 7 no-asset

cases that comprise over 90% of the chapter 7 cases filed by natural

persons. Most case administrative functions were ultimately

reallocated to an administrative agency in the executive branch of

*63 the federal government, to wit, the Executive Office of the

United States Trustees lodged in the U.S. Department of Justice and

reporting ultimately to the U.S. Attorney General. One of the central

functions of the Executive Office of the United States Trustee is to

appoint and supervise the private panel of chapter 7 trustees. As

part of the process of supervising chapter 7 cases, it became the

primary administrative responsibility of the United States trustee to

make certain that the panel trustees moved their assigned cases to an

expedited closing. The function, however, of actual closing a case

remained vested with the Clerk of the Court. Since the filing of a

final report in a no-asset case still requires some sort of

administrative review by the United States trustee this worked to

ensure that trustees timely co-operated in the closing of no-asset

cases. [FN8]



      FN8. 11 U.S.C. § 704(9).







With this as the institutional background, it becomes understandable

that this Rule is intended to address two governmental entities and

not parties in interest, namely, the Clerk of the Bankruptcy Court

and the United States trustee. This Rule sets up a "default rule"

that authorizes the Clerk to close a case, absent other unexpressed

conditions, when a thirty-day period has run after the trustee files

a no-asset report with the Clerk and the United States trustee and

the United States has not filed an objection that would bring the

case back to the attention of the judge assigned to the case. If

there were no such default rule, the only way the Clerk's office

could ascertain whether the United States trustee was fully satisfied

with the chapter 7 trustee's administration of the case would be to

insist that the United States trustee take the additional affirmative

act of sending in periodic reports advising the Clerk to close a

scheduled list of numbered chapter 7 cases. That practice would

impose an intolerable burden on the United State trustee's severely

limited support staff. [FN9] The default rule eliminates one round of

paper.



      FN9. The 1991 Advisory Committee Note to Rule 5009

      states, "This amendment facilitates the United States

      trustee's performance of statutory duties to supervise

      trustees and administer cases under chapters 7, 12, and

      13 pursuant to 28 U.S.C. § 586."







Why should the Clerk care whether a case is closed or not? The

explanation may not be readily apparent to anybody on the outside of

the bankruptcy administrative system looking in. Of course, as with

any government agency, statistics are maintained by the

Administrative Office of the United States Courts on the rate at

which each Clerk's office closes cases. These statistics are reported

to the Congress as an essential part of the annual budgeting process

for the operation of the courts, and for the district-by-district

allocation of that appropriation by the Administrative Office. Apart

from statistics and budgeting, one of the most important

administrative functions of the Clerk is to collect filing fees in

each bankruptcy case. It is only the Clerk, and not the United States

trustee, who has the institutional duty of disbursing a standard fee

to the panel trustee for "administering" a no-asset chapter 7 case.

[FN10] The Clerk cannot, however, disburse that standard fee until

the case is actually closed as evidenced by an entry by the Clerk in

the docket of that case. Then the balance of the filing fee has to be

periodically remitted to the United States Treasury as a revenue

measure. *64 Thus, the bureaucratic function of Rule 5009 has really

has nothing to do with the debtor. [FN11] For this reason, Rule 5009

cannot be construed as granting any substantive right or interest to

the debtor in any property that came into the estate upon the filing

of the chapter 7 petition by operation of law.



      FN10. 11 U.S.C. § 330(b)(1). "Chapter 7 trustees have an

      incentive to administer no asset cases promptly: they are

      not paid until after their services are rendered, ... and

      the case is ready to be closed." In re Hart, 76 B.R. 774,

      776 (Bankr.C.D.Cal.1987).







      FN11. "Moreover, under Section 350 and Rule 5009, the

      final act of administration could very well be a purely

      ministerial act of which the debtor and other parties

      would receive no notice." Korvettes v. Sanyo Electric (In

      re Korvettes), 42 B.R. 217, 221 (Bankr.S.D.N.Y.1984),

      reversed



      on other grounds, In re Korvettes, 67 B.R. 730

      (S.D.N.Y.1986).







[6] Link to KeyCite Notes [7] Link to KeyCite Notes Rule 5009 has to

be read as creating a rebuttable presumption. The trustee has

rebutted the presumption by averring that he was either intentionally

misled by the debtors or their agent, the prospective broker, or that

if he made an earlier misjudgment, then he is obligated to withdraw

his no-asset report and to administer the asset in question as soon

as he has learned of his earlier misjudgment. [FN12] The Rule

impliedly leaves it to the discretion of the Court to determine what

kind of showing a trustee has to make before he can burst the bubble

of presumption. The Court is now satisfied that the trustee has burst

that bubble. As a final consideration on this point, to the extent

that the construction that the debtors' counsel offers for Rule 5009

is inconsistent with the express substantive provisions of section

554, it has long been a fundamental postulate in bankruptcy law that

a Federal Rule of Bankruptcy Procedure cannot be construed to trump a

substantive provision of the Code, and so counsel's argument fails on

this point as well.



      FN12. The Court in Vonderahe v. Polaniecki, 276 B.R. 856,

      859-860 (S.D.Ohio 2001) stated that the "trustee's prior

      Interim Report listings of certain assets as having zero

      value did not constitute abandonment of



      assets in absence of an abandonment hearing and formal

      order of the bankruptcy court."







Instead, Rule 6007 sets forth the procedures the trustee or debtor in

possession must take in order to effectuate abandonment of property

of the estate. Fed. R. Bankr.P. 6007, provides in pertinent part:

(a) Notice of proposed abandonment or disposition; objections;

hearing. Unless otherwise directed by the court, the trustee ...

shall give notice of a proposed abandonment or disposition of

property to the United States trustee, all creditors, .... party in

interest may file and serve an objection within 15 days of the

mailing of the notice, or within the time fixed by the court. If a

timely objection is made, the court shall set a hearing on notice to

the United States trustee and to other entitles as the court may

direct. (Emphasis added)

Clearly in this instance the trustee did not take the needed steps to

abandon the debtor's property. [FN13]



      FN13. And in a case decided under the former Bankruptcy

      Rules, the court in In re Teltronics Services, Inc., 39

      B.R. 446, 453-454 (Bankr.E.D.N.Y.1984) stated that "all

      causes of action ... vested in the trustee ... They

      continued to be the property of the estate until the

      Court authorized their abandonment or the bankruptcy

      proceeding was closed."







It is not necessary to address the debtors' reliance argument other

than to say that merely listing a residence for sale does not

constitute "reliance." Title to the property has not changed, and

there are no other facts suggested by the debtors that begin to

approach "reliance." Even stretching their argument to the fullest,

the Court does not perceive that their "reliance" was reasonable when

looking at this case as a whole. [FN14] The debtors never *65 had the

authority to list their residence for sale without notifying the

trustee in the first place.



      FN14. In In re Popa 218 B.R. 420, 428

      (Bankr.N.D.Ill.1998), aff'd, Popa v. Peterson, 238 B.R.

      395 (N.D.Ill.1999), the court denied the debtor's motion

      to compel the trustee to abandon property because it

      found that "there is substantial equity in the Property,

      which, when sold, will permit a substantial dividend to

      creditors. The Property is therefore not burdensome to

      the estate, but is of significant value and benefit to

      the estate."







These debtors have scheduled very substantial unsecured claims that

have been liquidated and are not subject to any bona fide dispute. It

is a fair presumption that several creditors with allowable claims

will file their proofs of claim upon receipt of a new notice of

discovery of assets, and those with claims described as disputed or

contingent by the debtor will also file their proofs of claim against

the debtors, to which the trustee or the debtors may file objections.

In this case, the adversary proceeding filed by Mr. Klausing took

until May 30, 2003 to be tried, and the plaintiff has been directed

to file proposed findings of fact and conclusions of law by June 13,

2003, with the debtors given an opportunity to file their proposed

counter findings of fact, conclusions of law, and supporting

memorandum of law by June 27, 2003. Under these circumstances, this

case may remain open for the next few years if either party to the

adversary files a notice of appeal of any judgment or order of this

Court.

Independent of the trustee's opposition to the debtors' motion, this

Court has carefully reviewed the "market survey" that purportedly the

trustee relied upon to the prejudice of the creditors of this estate.

(The Court will not demean the debtors by suggesting that it appears

that they instructed the broker concerning the range of value that

would be useful for their purposes.) Nevertheless, a mere perusal of

the "market survey" shows on its face that it was not prepared by an

independent fee appraiser with no economic interest in the sale of

the property or any prospective business relationship with the

debtors. The enclosure letter explicitly states that the "surveyor"

was hoping for the debtors to list their residence with them for

resale. And even this Court's preliminary review of each of the

"comparables" shows them to be materially misleading, based upon the

dates of sale and the attributes of each of the three comparable

properties. The "subject property" has three bedrooms and two baths,

an eat-in kitchen, a fully finished basement, seven rooms, and a

garage. Every other "higher priced" property has no more than six

rooms and one of the "comparables" only has one bathroom. In

addition, three of the four "comparables" show sales dates of not

less than ninth months before the date of the "market survey."

Assuming that all comparables continued to appreciate from their

respective dates of closing to the date of this market survey, then

those comparables would materially understate their value. It would

be pointless to waste the time of this Court to conduct an

evidentiary hearing with respect to the "market survey." On its face,

this "market survey" bears very little probative value, and is likely

to be inadmissible because it was not prepared by a licensed and

disinterested appraiser to begin with.

In addition, this Court has to rely upon the combined legal and

business expertise of the panel trustee and the proper exercise of

his fiduciary duty on behalf of the creditors of the estate. If for

any reason, the trustee has now determined that he may have been

misled by the debtors or their agent in inducing him to file a

no-asset report, this case remains open and he has the right or duty

to correct any temporary misjudgment of realizable value. *66 There

are very substantial unsecured liabilities in this case, and the only

apparent asset of any nonexempt value is the debtors' residence. The

debtor has presented absolutely no proposed purchase and sale

agreement for the property with an unrelated third party, and as Mr.

Schoenewerk himself testified within the past two weeks, this is the

most active season in this market. The debtors can prove no material

reliance upon the trustee's initial no asset report. And if the

trustee determines that the most expeditious practice is to list this

property with an experienced real estate auctioneer, as many other

trustees do under just these circumstances, then this is likely to

lead to the highest price to be paid for the property. But if he

wants to list it with a licensed broker in whom he has confidence,

then that is again up to him, and either application will be noticed

to the debtor and the debtors' counsel.

The Court does not find it necessary under the totality of the facts

and circumstances to conduct an evidentiary hearing to determine

whether the debtors or their prospective real estate agent did or did

not deliberately mislead the chapter 7 trustee as to the then

"present fair market value" of their residence in order to induce him

to file a no-asset report. Mr. Schoenewerk has already testified that

he cannot take any more time off from work at this new job in

Virginia, nor can he bear the travel costs, let alone pay for the

litigation defense costs. As the defendants' counsel represented

within the past two weeks, Mrs. Schoenewerk's present health and

emotional condition will be jeopardized if she has to participate

actively in preparing for and testifying in any contested hearing or

proceeding.

Instead the Court is prepared to rely upon its own situation sense to

conclude that it simply defies credulity to argue that this property

was properly valued in the schedules, and that within one year, the

property has benefitted by market appreciation at least $85,000 to

$95,000 in a lower-middle income residential area from a base of

$145,000 to $155,000. That would be an increase of value for a modest

single family residence in one year of approximately 60%. Even if the

property were to sell for $205,000, and the debtors were permitted

their $20,000 joint homestead exemption, there would still be an

additional $45,000 in gross proceeds, before deducting closing costs

to distribute to unsecured creditors. It would be a breach of the

trustee's overriding fiduciary duty to maximize the distribution to

holders of allowed unsecured claims to walk away from $45,000 or

perhaps considerably more in net proceeds of sale.

This situation is analogous to a motion to vacate an order or

judgment of the Court based upon a mistake or in order to avoid a

palpable injustice under Fed. Bankr.R. Pro. 9024. [FN15] At this

point in this chapter 7 case, it is obvious that the debtors want to

relocate from this jurisdiction to Virginia without incurring further

litigation costs or any further disruption to their family life, and

that no legitimate equitable purpose would be served in granting the

debtors the relief they now seek--to take the net proceeds of this

sale to the prejudice of the creditors of this estate. The only

interest they have in the property under New York State exemption law

is the $20,000; bankruptcy law is not intended to subsidize the

purchase of replacement homes of chapter 7 debtors.



      FN15. If the trustee's performance was lacking in

      sufficient diligence, then the remedy for that

      negligence, if any, is surely not to punish the unsecured

      creditors of this estate, but to make a downward

      modification in the trustee's commission or his counsel's

      final fees.







                               *67 Conclusion

So now that the Court has established the uncontroverted fact that

this case remains open and the reasons for this status, there is no

legal or equitable basis for the debtors to allege that by virtue of

section 554 or Rule 5009, the estate's interest in the property has

been abandoned. Based upon these indisputable facts alone, including

those in the record of this case for which this Court can take

judicial notice, the debtors' motion is denied without prejudice.

The Court strongly urges the trustee and the debtors to save the

estate and themselves the costs of protracted litigation by exploring

a consensual resolution of this matter, and the Court is willing to

lend its good offices to assist the parties in exploring the range of

alternatives. In every dispute over dollars, well-advised parties

should be able to reach a satisfactory resolution over the allocation

of dollars. Since the debtors have already decided to sell the

property and move out of the state before the beginning of the next

school year, there should be no emotional issues of attachment to

this property that should cloud the proper exercise of reason. Of

course, the parties can only negotiate in a constructive manner when

a firm selling price has been established and the sale has been

approved by the Court after notice and hearing. It goes without

saying that it is the duty of the debtors to assist the trustee

[FN16] and his agents in making this property available for

inspection by prospective purchasers and ensuring that upon receiving

a call from the trustee or his agent in not less than twenty-four

hours before any showing that the property will be made presentable

to prospective purchasers. It will be in everybody's interest to

co-operate to the fullest in order to make this sale as least

disruptive as possible, and the season is already well underway.



      FN16. 11 U.S.C. § 521(3) states that the debtor shall

      "cooperate with the trustee as necessary to enable the

      trustee to perform the



      trustee's duties under this title ..."







So ordered.

Bkrtcy.E.D.N.Y.,2003.

In re Schoenewerk

304 B.R. 59, 50 Collier Bankr.Cas.2d 274

END OF DOCUMENT