• Attorney Arna D. Cortazzo

"You can't have your cake and eat it too..." Bankruptcy court says "Surrender&qu


An October 2016 decision from the 11th Circuit Court of Appeal has answered questions about the meaning of surrendering a home in Federal bankruptcy court in Florida. The Faillas of Boca Raton filed for Chapter 7 bankruptcy protection in 2011. Their house was upside down. In the statement of intention (required in the bankruptcy court), they stated they were going to surrender their house. In all cases, the bankruptcy trustee has the right to sell the house to pay the creditors. Since the Failla's house was worth less than the balance of the mortgage, the bankruptcy trustee “abandoned” the property back to the Faillas.

The lender, Citibank, sought to foreclose, and the Faillas fought the foreclosure in State Court. Citibank filed a motion in the federal bankruptcy court to compel the Faillas to surrender the property to the bank. The bankruptcy court granted the Motion and the Faillas appealed the decision.

The Eleventh Circuit Court of Appeal stated "The Faillas may not say one thing in bankruptcy court and another thing in state court: The concern here is that the Debtor is making a mockery of the legal system by taking inconsistent positions. In an effort to obtain her chapter 7 discharge, the Debtor swears—under the penalty of perjury—an intention to “surrender” her property. In other words, the Debtor is representing to the Court that she will make her property available to the Bank by refraining from taking any overt act that impedes the Bank’s ability to foreclose its interest in the property. Yet, once she receives her discharge, the Debtor in fact impedes the Bank’s ability to foreclose its mortgage. In bankruptcy, as in life, a person does not get to have his cake and eat it too."

So what does this mean? “Debtors who surrender their property can no longer contest a foreclosure action. . . . Debtors who surrender property must get out of the creditor’s way.”

Failla v. Citibank, N.A. (In re Failla), 2016 WL 5750666 (11th Cir. Oct. 4, 2016).

motion, and the district court affirmed.


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       Arna D. Cortazzo

Protecting Floridians' Rights for over 30 years.