The U.S. Bankruptcy Code (the Code) affords debtors and trustees many powerful tools intended to promote the key goals of bankruptcy—providing a debtor with a “fresh start” and recovering value for creditors. One of the tools is the power of a debtor or a trustee to abandon property of the estate under §554(a) of the Code. This section provides that “[a]fter notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.” This sensible power to effectively walk away from burdensome property is analogous to the power to reject economically burdensome contracts. It is completely appropriate and consistent with the goals of the Code.
But what happens, according to §554, after a trustee or Chapter 11 debtor in possession abandons property is unclear. We as practitioners are left with an undeveloped body of case authority that fails to answer the obvious question: now what? Whether one represents a municipality wondering who will be responsible for maintaining land that was abandoned by a debtor, or a secured creditor with a secured interest in abandoned real estate, practitioners are often left struggling with how to address the post-abandonment rights and obligations of their clients.
