These two bankruptcy cases — one a chapter 7 and the other a chapter 13— present a relatively novel question: how does a debtor surrender real property in bankruptcy? In the chapter 7 case, the debtor failed to schedule real property that was subject to a state court foreclosure action or file a statement of intentions under Bankruptcy Code § 521 indicating whether she intended to retain or surrender the property.. In the chapter 13 case, the debtor filed plan that proposed to surrender her homestead, which was also subject to a foreclosure action, under Bankruptcy Code § 1325. But in both cases, the debtors actively defended the state court foreclosure actions after they either received a discharge or surrendered their property. This Court must decide whether actively opposing a state court foreclosure action is inconsistent with “surrendering” property.
At a minimum, “surrender” under Bankruptcy Code §§. 521 and 1325 means a debtor cannot take an overt act that impedes a secured creditor from foreclosing its interest in secured property. Although “surrender” is not defined in the Bankruptcy Code, the First and Fourth Circuits have interpreted that term to mean a debtor 'must relinquish any rights in the secured property — including the right of possession — and make it available to the secured creditor. Because those definitions accord with the dictionary definition of “surrender” and public policy, this Court agrees with the First and Fourth Circuits. By actively opposing the state court foreclosure actions, the debtors .in these cases failed to “surrender” their property.
Background
The facts in In re Metzler are straightforward: Before Lisa Metzler filed for chapter 13 bankruptcy, Wells Fargo sued in state court to foreclose its mortgage on her homestead. Debtors typically file chapter 13 bankruptcy to save their home. And in fact, that is what Metzler initially attempted to do. Her original chapter 13 plan provided for adequate protection payments and cure of $35,000 in prepetition arrearages.
After the Court confirmed Metzler’s third amended plan, Wells Fargo went back to state court to conclude its foreclosure action. But Metzler actively defended Wells Fargo’s efforts to foreclose is mortgage. So Wells Fargo, moved this Court for an order revoking its confirmation order.
The facts in In re Patel are more complicated: Nearly ten years ago, Nootan Patel bought property located at 5105 West Grace Street, Tampa, Florida, with a
Apparently, Patel had originally taken title to the West Grace Street property in her name and her daughter’s name as joint tenants with a right of survivorship.
Because she did not believe she owned the West Grace Street property, Patel never filed a statement of intentions indicating Whether she intended to reaffirm the mortgage debt, redeem the property, or surrender it.
Unbeknownst to Patel, Mark Stopa (of the Stopa Law Firm) began defending the foreclosure action on behalf of Patel and her daughter.
Conclusions of Law
A chapter 7 debtor has three options when it comes to secured property: the debtor can redeem the secured property, reaffirm the debt it secures, or surrender the secured property.
[WJithin thirty days after the date of the filing of a petition under chapter 7 of • this title or on or before the date of the meeting of creditors, ... [the debtor shall] file with the clerk a statement of his intention with respect to the retention or surrender of such [secured] property and, if applicable, specifying that such property is claimed as exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm debts secured by such property.23 -
A debtor must then perform his or her stated intention, generally within thirty days after the date first set for the meeting of creditors.
The Bankruptcy Code imposes similar requirements on a chapter 13 debt- or. A chapter 13 debtor is not required to file a statement of intentions. But a chapter 13 debtor is required to file a plan of reorganization indicating how he or she proposes to treat secured property. And Bankruptcy Code § 1325 only gives chapter 13 debtors three options for treating secured debt in a plan: gain the secured creditor’s consent to the plan treatment, cram down the plan treatment over the secured creditor’s objection, or surrender the secured property.
In fact, neither Metzler nor Patel dispute that they cannot retain the collateral at issue without paying for it. As it turns out, Patel actually does not oppose foreclosure at all. Her lawyer apparently has been opposing the foreclosure action -without her authorization. Metzler, however, does oppose foreclosure, but she contends the fact that she “surrendered” her homestead under the confirmed plan does not preclude her from defending Wells Fargo’s foreclosure action.
Thus, the most sensible connotation of “surrender” in. the present context is that the debtor agreed to make the collateral available to the secured creditor&emdash;viz., to cede his possessory rights in the collateral&emdash;within 30 days of the filing of the notice of intention to surrender possession of the collateral.32
Less than a year after the First Circuit construed the term “surrender” in § 521 to mean to “make available,” the Fourth Circuit, in In re White, construed it in the context of § 1325 in a similar fashion.
At the most basic level, then, the word “surrender” means the relinquishment of all rights in property, including the possessory right, even if such relinquishment does not always require immediate physical delivery of property to another.34
The Court agrees with the First and Fourth Circuits that surrender, at a minimum, requires a debtor to relinquish secured property and make it available to the secured creditor. That does not mean, as Judge Jennemann noted in In re Plummer, that the debtor must “deliver” the property to the secured creditor.
Here, both Metzler and Patel plainly took overt acts to prevent Wells Fargo and U.S. Bank from foreclosing their mortgages. Patel filed an answer and affirmative defenses and even sought summary judgment in her favor. Of course, Patel can be forgiven for opposing
But simply dissolving the automatic stay cannot be what “surrender” means because it would effectively permit the type of “ride through” that the Eleventh Circuit held was impermissible in In re Taylor.
Under Metzler’s definition of “surrender,” a “ride through” would be permissible. After all, “surrender” is complete, under Metzler’s definition, the moment the automatic stay is lifted, and the creditor is permitted to pursue its state court remedies. If that were the case, a debtor could enjoy possession of the collateral indefinitely while hindering and prolonging the state court process. Moreover, like the “ride through” at issue in Taylor, Met-zler’s definition of surrender would also render the other alternatives in § 1325(a) — and § 521 — of little value.
Conclusion
“Surrender” must mean something. In the context of Bankruptcy Code §§ 521 and 1325, the Court concludes the term means that a debtor must relinquish secured property and make it available to the secured creditor by refraining from taking any overt act that impedes a secured creditor’s ability to foreclose its interest in secured property. Because Met-zler and Patel took affirmative steps to oppose the state court foreclosure actions here, they failed to surrender their property as required under Bankruptcy Code §§ 521 and 1325.
ORDERED.
Notes
. Metzler Doc. No. 2.
. Metzler Doc. Nos. 6, 7 & 30.
. Metzler Doc. No. 33.
. Metzler Doc. No. 30.
. Metzler Doc. No. 41.
. Metzler Doc. No. 46 (emphasis added).
. Patel Doc. No. 46-1.
. Patel Doc. No. 46 at ¶ 4.
. Patel Doc. No. 1.
. Patel Doc. No. 1 at Schedule A.
. Patel Doc. No. 46-2.
. Patel Doc. No. 46-4; Patel Doc. No. 49 at 6.
. Patel Doc. No. 1 at Schedule D.
. Patel Doc. No. 1.
.Patel Doc. No. 41.
. Patel Doc. No. 46 at ¶ 10.
. Patel Doc. No. 46-6; Patel Doc. No. 49 at 12-13.
. Patel Doc. No. 46-6 at 7-12.
. Id. at 21-22.
. Based on Patel’s testimony at an April 30, 2015 hearing on U.S. Bank's motion to reopen Patel’s bankruptcy case and compel her to surrender the West Grace Street property, ‘the Court finds that Patel (i) had not seen the affidavit Stopa filed in state court until receiving a copy from U.S. Bank's counsel; (ii) had no idea where the facts in it came from; (iii)
. Patel Doc. No. 46.
. In re Plummer,
. 11 U.S.C. § 521(a)(2)(A).
. 11 U.S.C. § 521(a)(2)(B).
. In re Taylor,
. 11 U.S.C. § 1325(a)(5)(A)-(C).
. 11 U.S.C. § 1325(a)(5)(B).
. 11 U.S.C. § 1325(a)(5)(C).
.
. In re Pratt,
. Id. at 18.
.Id. at 19.
.
. Id.
.
. Id.
.
. Id. at 1516.
. Id. at 1515 (quoting In re Kennedy,
.The Court has already entered an order on the motion to revoke Metzler’s confirmation order (Metzler Doc. No. 52). The Court will enter a separate order granting the motion to compel Patel to surrender the West Grace Street property (Patel Doc. No. 46).