In re Failla
529 B.R. 786
S.D. Fla.2014Background
- Debtors own real property at 1498 SW 19th Street, Boca Raton, FL 33486 and pledged it as security for a $500,000 loan from HomeBanc Mortgage Corp. on August 25, 2006 via a mortgage recorded September 12, 2006.
- Debtors defaulted on the Note and Mortgage, leading CitiBank to file a foreclosure complaint in state court on July 7, 2009.
- Debtors filed a Chapter 7 petition on August 31, 2011 and submitted Schedules declaring the Property subject to a valid first lien and an amount owed greater than property value.
- Debtors initially stated an intention to surrender the Property under 11 U.S.C. § 521(a)(2)(A) but later attempted to amend to reaffirm, which was untimely and ineffective.
- The Chapter 7 case was dismissed/closed in December 2011, but Debtors continued possession of the Property and opposed the state court foreclosure.
- The Joint Stipulation confirms Debtors’ proposed amendment was ineffective and that they are obligated to surrender the Property.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What constitutes effective surrender under §521(a)(2)? | CitiBank argues surrender is to the lienholder and requires relinquishing control. | Debtors contend surrender may be to the Trustee or may be implicit by not opposing, depending on interpretation. | Debtors must surrender to the lienholder and may not actively defend the foreclosure. |
| What remedies follow failure to surrender as required by §521(a)(2)? | CitiBank may enforce surrender or seek consequences for noncompliance. | Debtors risk default consequences but may contest if not properly instructed. | Failure to surrender appropriately jeopardizes discharge and permits court-ordered action. |
| Does §521(a)(2)(B) implicitly permit ongoing defense of foreclosure? | Defendants’ defense delays discharge and undermines the intent of surrender. | Defendants argue rights to defend exist notwithstanding surrender. | No; active defense of foreclosure is incompatible with proper surrender. |
Key Cases Cited
- In re Plummer, 513 B.R. 135 (Bankr.M.D.Fla.2014) (discusses surrender defined by common usage and actions to obtain possession)
- In re Taylor, 3 F.3d 1512 (11th Cir.1993) (debtors must indicate intention to surrender or redeem/reaffirm)
- In re Pratt, 462 F.3d 14 (1st Cir.2006) (surrender implies making collateral available to secured party)
- In re Steinberg, 447 B.R. 355 (Bankr.S.D.Fla.2011) (three options for chapter 7 debtor with liened property: surrender, redeem, reaffirm)
- In re Kasper, 309 B.R. 82 (Bankr.D.D.C.2004) (discusses ambiguity of surrender vs trustee under §521)
- In re Cornejo, 342 B.R. 834 (Bankr.M.D.Fla.2005) (notes lack of statutory definition for surrender and common usage)
- In re Jones, 261 B.R. 479 (Bankr.N.D.Ala.2001) (11th Circuit duties under §521(2) are mandatory when unambiguous)