STATEMENT OF INTENTION TO SURRENDER SECURED PROPERTY IN CHAPTER 7 BANKRUPTCY CASES – YOU BETTER DO WHAT YOU SAY

by Win Holbrook

     The United States Bankruptcy Code at 11 U.S.C. §521(a)(2) requires a debtor to file in his or her bankruptcy case a “statement of … intention with respect to the retention or surrender” of their property that is pledged as collateral on a loan. [See Official Form 108 – Statement of Intention for Individuals Filing Under Chapter 7 (“Statement of Intention”)]. The debtor must disclose in the Statement of Intention if the property is exempt and the debtor has the choice to reaffirm the debt secured by the property; retain the property and redeem it; or surrender the property. And, pursuant to section 521(a)(2)(B) the debtor has thirty days after the first date set for the meeting of creditors pursuant to section 341 of the bankruptcy code, or such additional time as the court may grant, to perform their intentions as set forth in the Statement of Intention.

     In the case of In re Fallis, --- F.3d --- (2016), 2016 WL 5750666, United States Court of Appeals for the Eleventh Circuit, the debtors signed and filed a Statement of Intention showing they wanted to surrender their home but they continued to oppose the state court foreclosure action that had been filed before the debtors filed bankruptcy. The bankruptcy court and the district court both held that the debtors violated Section 521(a)(2) by opposing the foreclosure action after filing the Statement of Intention showing they were surrendering their home. The Court of Appeals agreed with the lower courts. The term “surrender” mandates that the debtors drop their opposition to a foreclosure action and the bankruptcy court has the power to direct the debtors to drop their opposition to the foreclosure.

     If a debtor files a Statement of Intention indicating they are going to surrender property securing a debt then they must comply or face the bankruptcy court’s broad powers to remedy abuses of the bankruptcy process.

     For more information on bankruptcy, please contact Win Holbrook at 272-9241 or wholbrook@andrewsdavis.com.


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