512 B.R. 790
Bankr. W.D.N.C.2014Background
- Debtors Roses filed Chapter 13 on December 5, 2012, owning a Florida residence valued at $30,000 encumbered by a SBA mortgage of about $78,653.
- Plan surrendered the Residence to SBA for foreclosure and granted relief from stay; SBA has neither foreclosed nor asserted control for over a year after plan confirmation.
- Roses seek permission to quitclaim the Residence to SBA without SBA’s consent; SBA did not respond or appear at the hearing.
- Court recognizes neither the Bankruptcy Code nor Florida law requires a creditor to foreclose or accept a quitclaim deed, but may permit state-law transfer absent objection.
- Court authorizes a process: the Roses may tender a quitclaim deed to SBA within 30 days; SBA has 60 days to accept, reject, or foreclose; failure to act permits recording the deed transferring title to SBA.
- Debtors’ counsel is awarded a $450 non-base fee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May the court force a creditor to foreclose or accept a quitclaim deed? | Roses rely on surrender concepts under §1325(a)(5)(C) and §1322(b)(9). | SBA cannot be compelled; creditor controls remedies and may reject or wait. | No; court cannot compel foreclosure or acceptance of a quitclaim deed. |
| Does §1325(a)(5)(C) require a creditor to accept surrendered property? | Plan surrender supports transfer to lender. | Arsenault and related authorities hold creditor may reject or delay actions; surrender does not force title passage. | No; surrender does not compel transfer of title to lender. |
| Does §1322(b)(9) require vesting property in the debtor or third party? | Vesting could force title transfer to the lender. | Rosa interpretation would be inconsistent with statutes and obligations; lender should not be forced to accept. | No; §1322(b)(9) does not compel lender to accept title. |
| Does Florida law permit a debtor to quitclaim to a secured creditor absent lender consent? | State conveyance law may allow delivery and presumed acceptance if lender does not object. | Lender cannot be forced to accept title; delivery and acceptance must be simultaneous and voluntary. | Florida law may permit the transfer if SBA does not object; court declines to compel acceptance but allows tender for SBA consideration. |
Key Cases Cited
- In re Arsenault, 456 B.R. 627 (Bankr.D.Ga.2011) (creditor may control its remedies; cannot be compelled to accept surrendered collateral)
- In re Pratt, 462 F.3d 14 (1st Cir.2006) (creditor cannot be compelled to accept property; surrender limits on debtor)
- In re Canning, 706 F.3d 69 (4th Cir.2013) (creditor's prerogative to accept or reject surrendered collateral)
- In re Brown, 477 B.R. 915 (Bankr.S.D.Ga.2012) (no authority to require secured creditor to assume ownership obligations)
- In re Khan, 504 B.R. 409 (Bankr.D.Md.2014) (debtor cannot force transfer of title to lender by fiat)
- In re White, 487 F.3d 199 (4th Cir.2007) (surrender contemplates relinquishment; not automatic transfer of ownership)