Burr & Forman

10.27.2016   |   Articles / Publications

Burr Alert: Eleventh Circuit Affirms That a Debtor’s Surrender in Bankruptcy Means Just That-You Must Surrender

Burr & Forman lawyers won a significant victory in the Eleventh Circuit earlier this month. In the case In re: David A. Failla, — F.3d — (2016), the U.S. Court of Appeals for the Eleventh Circuit affirmed that a person who agrees to “surrender” his house in bankruptcy pursuant to 11 U.S.C. § 521(a)(2) may not oppose the creditor’s foreclosure action in state court. Our firm was one of the first to advance this argument, and many, but not all, of the bankruptcy judges in Florida agreed with our interpretation of surrender under the bankruptcy code and related case law. This opinion from the Eleventh Circuit provides much-needed guidance to bankruptcy judges, trial judges, and debtors regarding the significance of surrender in bankruptcy and its effect on the rights of both the debtor and the creditor.

In Failla, the creditor filed a foreclosure action against the borrowers, who responded with a litany of defenses to foreclosure. The borrowers then filed a chapter 7 bankruptcy case in which they scheduled the mortgage loan on their home as undisputed and stated their intent to surrender the property pursuant to § 521(a)(2). The borrowers quickly received their discharge of personal liability on the debt and the bankruptcy case concluded. But, when the creditor resumed the foreclosure action, the borrowers continued their vigorous opposition to foreclosure. This is a fact pattern that repeats itself over and over, thousands of times a year. The cost to creditors and the judicial system at large is substantial.

Download the full article, “Burr Alert: Eleventh Circuit Affirms That a Debtor’s Surrender in Bankruptcy Means Just That-You Must Surrender.”