#2315 signed 4-11-97
NANCY ANN LLOYD,
CASE NO. 96-41298-7
This case is before the Court on the trustee's "Motion for Withdrawal of No Distribution
Report." The trustee appears by counsel Robert Baer and John Houston. The debtor objects to
the motion and appears by counsel Patrick Barnes. The Court has reviewed the relevant materials
and heard argument, and is now ready to rule.
The debtor filed for bankruptcy in June 1996. In the Statement of Financial Affairs included in her bankruptcy schedules, she reported she had made monthly gifts of $100 each to Right to Life of Topeka and St. Mary's Academy of St. Mary's during the year before she filed. The trustee knew such gifts might be recoverable under 11 U.S.C.A. §548(a)(2) as transfers for less than reasonably equivalent value. At the meeting of creditors required by 11 U.S.C.A. §341(a), the debtor informed the trustee she had received a refund for the 1995 tax year. On Schedule I, the debtor reported her husband had no income and she earned $42,540 per year but had nearly one-third of her pay withheld for payroll and social security taxes, thus indicating she would likely be entitled to a tax refund for 1996 as well. Despite knowing he might recover $2,400 under §548 and be entitled to a portion of the debtor's likely 1996 tax refund, the trustee abandoned these non-exempt assets in connection with making his "Report of No Distribution" (more commonly called a no-asset report) in July.
Sometime later, the trustee learned that the debtor, who was paid bi-weekly or twenty-six
times a year, had actually given $100 each per pay period to Right to Life and St. Mary's
Academy during the year before she filed for bankruptcy, for a total of $5,200. He also learned
she would receive a substantial tax refund for 1996. Consequently, in February 1997, he filed his
motion to withdraw the report of no distribution, seeking also, of course, to set aside his
abandonment of assets. The debtor contends that she disclosed sufficient information to enable
the trustee to determine the extent of the potential §548 recoveries and tax refund, and that the
trustee's abandonment cannot be set aside in the absence of fraud or concealment.
After considering the parties' pleadings and arguments and reviewing relevant case law, the Court concludes that the trustee's motion should be granted in part and denied in part. Other courts have generally held that if an asset has been disclosed, its subsequent abandonment by the trustee is final despite an understatement of the asset's value. Those cases have involved a debtor's estimate of the value of, for example, a vehicle or real property, and sale of the property after abandonment for more than the estimate. The Court agrees that absent actual fraud, the trustee's abandonment should be final in those situations. This rule suggests the result for part of this case.
The debtor gave the trustee all the information she had in June 1996 about the possibility that she would be entitled to a tax refund for 1996. The trustee concedes the debtor told him she had received a 1995 tax refund, and he has not questioned the gross income and withholding taxes she reported in her statement of current income, or otherwise suggested the debtor misled him on this point. He simply decided not to keep the case open for six to ten months on the chance the debtor would qualify for a refund which the estate would be entitled to share.
On the other hand, while the debtor did disclose that she had made gifts which might be recoverable under §548(a)(2), she substantially understated their total value. Unlike cases involving property whose value could reasonably be disputed, the debtor donated cash (or its equivalent), property with a fixed value that cannot properly be estimated to be less than the amount actually given. Yet in her bankruptcy schedules, documents she signed under penalty of perjury, she understated the amount of her gifts by more than 50%. Under these circumstances, the debtor can hardly claim that the trustee should not have relied on her own declaration of the dollar amount of these gifts. While the trustee was aware that he was abandoning $2,400 in possible recoveries under §548, he did not know that he was actually abandoning more than twice that amount. The Court is troubled by the trustee's apparent view that $2,400 was not enough money to try to recover, but cannot allow that concern to override the debtor's failure to disclose the full amount of her gifts of money.
The Court concludes that the trustee should not be allowed to set aside his abandonment of the estate's interest in the 1996 tax refund because the debtor did not mislead him about its availability. That portion of his motion is hereby denied. However, the Court concludes that the trustee should be and he is hereby allowed to withdraw his no-asset report and set aside his abandonment of the possible recoveries under §548 because the debtor substantially under reported the amounts that might be recoverable.
IT IS SO ORDERED.
Dated at Topeka, Kansas, this _____ day of April, 1997.
JAMES A. PUSATERI
CHIEF BANKRUPTCY JUDGE