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Trustee May Sell Car Over Debtor's Objection, Says Judge Bucki (in re Burgio)

Judge Bucki in Buffalo has fully supported a bankruptcy trustee's motion to have a partially exempt car turned over, and denied the debtor's motion that the asset be abandoned, in a case released January 11 (In re Burgio; WDNY Ch. 7 Bk #10-12259; decision Dec. 23, 2010.) 

At issue was the debtor's 2005 Hyundai Sonata. 'Kelly Blue Book' and 'NADA' valuations on the car were all over the place, from $3,675 trade-in to $8,505 retail. The debtor's own appraisal of the vehicle was, according to the decision, a one-sentence dealer valuation at $2,000 to $2,500. The debtor was entitled to exempt $2,400 in equity in the vehicle.

The trustee had moved for an order requiring the debtor to turn over the car. The debtor cross-moved for an order requiring the trustee to abandon his interest in the vehicle back to the debtor. The debtor argued that, after cost of sale and the $2,400 exemption, there would be very little, if any, value left in the vehicle. Both the trustee (Mark Wallach) and the debtor's attorney (peter Grubia) submitted extensive legal arguments. The Court stated that, as the debtor had an obligation to turn the asset over, the debtor had the burden of proof that the car had 'inconsequential' value to the bankruptcy trustee (that is the statutory requirement for an asset to be abandoned back to the debtor.)

The Court denied the debtor's motion and granted the motion of the trustee. The court stated that the trustee was entitled to use his or her sound business judgment in marketing assets, and the court was not going to interfere. The court would not impose a standard rule of convenience as to how the value of cars should be determined, and preferred to leave it up to the parties to negotiate a settlement. However, by granting the trustee the turnover order, the judge certainly gave the trustee the greater leverage in those negotiations.

I would anticipate that Judge Ninfo in Rochester would rule in a similar fashion, if the issue was presented to him. I was struck that Judge Bucki did not appear to include in his decision the fact that the state legislature had exempted cars for a good reason. They are essential for a debtor to get to work and take care of life's necessities, and by allowing the trustee to take the car - even for a day - the life of the debtor would be greatly disrupted. On the other hand, the debtor here didn't appear to have obtained a very good estimate of value. An appraisal by an auctioneer would have been much more valuable, and would be much more useful in negotiating with a trustee.

The car exemption goes up to $4,000, under the new exemption update law that goes in effect January 21. It is interesting - to me at least - that on December 22, the day before this decision was signed, supporters of the new law (including myself) held a press conference in Albany. New York City attorney Charles Juntikka, who organized the conference, had actually arranged for two of his clients to travel all the way from New York to Albany to participate in the event. These two clients were existing bankruptcy debtors who each were threatened with the loss of their car - and their livelihood - by trustees who demanded turnovers. This made a big impression on the press and they were featured in a local TV news story that night. I hope that under the new exemption scheme this issue won't come up as often as it does now.

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Peter R. Scribner, Esq.
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