John F. Kenny

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
JOHN F. KENNY, SR.
DEBTOR
CASE NO.
04-03015-5-ATS
ORDER DENYING MOTION TO REOPEN CASE
The matters before the court are the chapter 7 trustee’s motion
to reopen case, motion to appoint trustee, motion to approve
compromise, motion to defer payment, and application to employ attorney
for the trustee. A hearing took place in Raleigh, North Carolina on
June 28, 2005.
John F. Kenny, Sr. filed a petition for relief under chapter 7 of
the Bankruptcy Code on August 17, 2004, and David M. Warren was
appointed trustee. Mr. Kenny listed as an asset on his Schedule B a
lawsuit pending in Nevada with an "unknown" value. The trustee
examined Mr. Kenny about the lawsuit at his § 341 meeting on September
20, 2004, and based on what he was told by Mr. Kenny, he determined
that the lawsuit had little value. On September 21, 2004, the trustee
filed a Report of No Distribution, a final decree was entered, and the
case was closed on November 22, 2004.
The trustee contends that he was contacted by counsel for the
defendant in the Nevada litigation on January 24, 2005, with an offer
to settle the matter for $5,000. At that time, the trustee was led to
Case 04-03015-5-ATS Doc 21 Filed 07/05/05 Entered 07/05/05 16:21:11 Page 1 of 4

2
believe that Mr. Kenny was not actively pursuing the litigation. The
trustee made a counteroffer of $7,500, which was accepted on May 27,
2005. The trustee then filed the motion to reopen and related motions
to effectuate the settlement. Mr. Kenny testified that he was not
aware that the trustee was in communication with defense counsel until
the motions were filed.
Mr. Kenny opposes the trustee’s motions, maintaining that the
trustee’s Report of No Distribution and the entry of the final decree
amounted to an abandonment of any unadministered assets pursuant to 11
U.S.C. § 554(c), and that the case may not be reopened to administer
assets previously abandoned and administered. Mr. Kenny also disputes
the allegation that he was not prosecuting the lawsuit, testifying that
he has purchased plane tickets for a September trial date, his wife
paid attorney’s fees to the Nevada attorney for continued work, and
portions of the lawsuit have survived a motion to dismiss or motion for
summary judgment. Finally, Mr. Kenny opposes the proposed settlement,
contending that the lawsuit has a value greater than $7,500, and noting
that if the trustee recovers $7,500, very few if any of those funds
would benefit the estate.
Section 554(c) provides
Unless the court orders otherwise, any property scheduled
under section 521(1) of this title not otherwise
administered at the time of the closing of a case is
abandoned to the debtor and administered for purposes of
section 350 of this title.
Case 04-03015-5-ATS Doc 21 Filed 07/05/05 Entered 07/05/05 16:21:11 Page 2 of 4

3
11 U.S.C. § 554(c). Section 350 provides
(a) After an estate is fully administered and the court has
discharged the trustee, the court shall close the case.
(b) A case may be reopened in the court in which such case
was closed to administer assets, to accord relief to the
debtor, or for other cause.
11 U.S.C. § 350.
Mr. Kenny contends that once the case was closed, all scheduled
assets were deemed administered under § 554(c), and that the language
"for purposes of section 350" clearly precludes reopening the case
under § 350(b) "to administer assets" that are already deemed to have
been administered. Section 554(c) refers to § 350 generally, not to §
350(a) or § 350(b) specifically, and its meaning is less than clear.
There are certainly times when it would be inappropriate to preclude a
trustee from reopening a case to administer a scheduled asset, such as
when a debtor misled the trustee about the value of the asset, and the
court declines to read § 554(c) as an absolute bar to reopening a case
to administer a scheduled asset.
In this case, however, the case will not be reopened to allow the
trustee to settle the litigation. A settlement of $7,500 would likely
result in little or no value to the estate, and the equities weigh in
favor of not reopening the case. The debtor has spent funds to
prosecute the litigation in reliance on the trustee’s abandonment, much
of which would have to be reimbursed by the estate. In addition, Mr.
Case 04-03015-5-ATS Doc 21 Filed 07/05/05 Entered 07/05/05 16:21:11 Page 3 of 4

4
Kenny has a remaining exemption in the amount of $3,100 that may apply
to any recovery.
Based on the foregoing, the motion to reopen the case is DENIED.
The companion motions are dismissed as MOOT.
SO ORDERED.
DATED: July 5, 2005
Case 04-03015-5-ATS Doc 21 Filed 07/05/05 Entered 07/05/05 16:21:11 Page 4 of 4