U.S. Bankruptcy Judge Laurel Isicoff recently ruled in favor of a Miami homeowner facing foreclosure, an important decision linking bankruptcy and foreclosure cases. The 14-page ruling challenged other decisions forcing homeowners to stop fighting foreclosure on property they surrender in bankruptcy. The judge ruled that surrendered property not administered by a trustee is abandoned to the debtor, not the creditor.
“Compulsory surrender of real property collateral by a debtor to a lienholder in Chapter 7 is not supported by and indeed ignores the express provisions of the Bankruptcy Code,” Isicoff wrote. “And consequently I must disagree with my colleagues who have held otherwise.”
The case involved mortgage holder AS Theia LLC, a Miami homeowner and his Sunny Isles Beach condo. It was the latest in an ongoing debate about the meaning and consequences of house surrenders in bankruptcy court. The central question is whether homeowners who surrender their property to get bankruptcy protection must stop fighting in state court to save the same homes from foreclosure.
In a similar 2011 case, In re Failla, the judge ordered the borrowers to stop defending a pending foreclosure action. The judge acknowledged the bankruptcy law did not specify whether a surrender was to the trustee or lienholder, but found the borrowers committed fraud by agreeing to surrender in one court but fighting to keep the property in another.
The district court upheld the decision, ruling the critical question was the “legal effect of the debtor’s decision to surrender,” not whether the property went to the trustee or lienholder.
Isicoff suggested the ruling ignores a key factor: whether or not the debtors complied with the surrender by not interfering with the trustee’s administration of the property.
This is an important decision because it gives homeowners the opportunity to have their day in court and require the lenders prove their case.
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Choosing the right attorney can make the difference between whether or not you can keep your home. A well-qualified Miami foreclosure defense attorney will not only help you keep your home, but they will be able to negotiate a loan that has payments you can afford. Miami foreclosure defense attorney Timothy Kingcade has helped many facing foreclosure alleviate their stress by letting them stay in their homes for at least another year, allowing them to re-organize their lives. If you have any questions on the topic of foreclosure please feel free to contact me at (305) 285-9100. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.