Abandonment Does Not Free Property From the Automatic Stay

Summary:  On October 28, 2013, the Bankruptcy Appellate Panel for the Ninth Circuit in Gasprom, Inc. v. Michelle Fateh, et al (In re Gasprom, Inc.), BAP No. CC-12-1567-KuKiTa, held that although abandonment terminates the stay protecting property of the estate, it does not free the abandoned property from the stay protecting property of the debtor.  Case law in individual debtor cases generally supported the BAP’s holding; however, contrary authority existed concerning corporate and partnership cases.  Upon abandonment the secured creditor proceeded with its foreclosure sale without seeking relief from the stay and the case was then closed.  The debtor then reopened the case seeking to hold the creditor in contempt for violation of the stay protecting the debtor’s property.  In ruling on the matter, the court held that the abandonment had fully terminated the stay or in the alternative the court would annul the stay to validate the foreclosure sale.  In finding the plain language of §362(a)(5) provided no distinction between individual and corporate/partnership debtors, the BAP held that the sale was in violation of the stay, and the bankruptcy court’s annulment of the stay to validate the foreclosure sale was an abuse of its discretion.

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