11th Circuit Agrees, Home Surrender is Permanent

Failla v. Citibank, N.A. (In re Failla), 838 F.3rd 1170 (11th Cir. 2016)

The 11th Circuit has agreed that once a debtor makes the election to surrender their home on the statement of intention in the petition they cannot then turn around and “undo” the surrender and oppose a foreclosure in state court. The court went so far as to say that to allow such an act would be an abuse of the bankruptcy process and that it is not even necessary under the circumstances for the lender to receive a lift of the automatic stay. In some writer’s views, we are likely to hear more on this again.

What’s a Debtor to Do?

In re Sagendorph, No. CV 15-40117-MGM, 2017 WL 327305

Along the same lines, yet intuitively opposite, the United States District Court for the District of Massachusetts recently held that a debtor cannot force a secured creditor take title to its collateral in complete satisfaction of the secured creditors claim over the objection of the creditor, (Wells Fargo) under 1322 (b)(2) and 1325 (a)(5)(C), even though there was more equity in the property than what was owed. Again, the “surrender” language was examined along with the “vesting” provisions of Chapter 13. The decision seems to leave a debtor in limbo. He must surrender the property when he says so; but it would seem the lender can refuse to accept the property! This leaves the debtor in an untenable position unless the Court uses it’s “Equity Powers” to enforce the “surrender” as a matter of equity. As stated above, look for more to come of this conflict.


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