All Banking Law, All in One Place. Bloomberg Law: Banking is the comprehensive research solution that powers your practice with access to integrated banking-related legal news, analysis,...
By Chris Bruce
Oct. 4 — Debtors who surrender property under the Bankruptcy Code can’t oppose foreclosure efforts by Citibank, a federal appeals court said Oct. 4 ( Failla v. Citibank N.A., 11th Cir., No. 15-cv-15626, 10/4/16 ).
The ruling by the U.S. Court of Appeals for the Eleventh Circuit eases foreclosures in that circuit in two ways. First, it means that a debtor who discharges mortgage debt by surrendering property under 11 U.S.C. 521(a)(2) can’t oppose creditors who then try to foreclose in state court.
The decision also speeds that process. Judge William Pryor, who wrote for a three-judge panel, said bankruptcy courts can order debtors who surrender property under Section 521(a)(2) to drop their opposition to foreclosure. The debtors said the bankruptcy court didn't have that authority.
The case involved husband and wife David and Donna Failla, who defaulted on their mortgage in 2009 and filed for bankruptcy in 2011. They agreed to surrender their house to discharge the mortgage debt, but fought Citibank's foreclosure proceeding in state court.
The bankruptcy court, on Citibank's motion, ordered the Faillas to surrender the property, and a district court affirmed.
Among other points, the Faillas said they need only surrender to the bankruptcy trustee. But the Eleventh Circuit disagreed and upheld both lower courts, saying they have to surrender the property and drop their efforts to stop foreclosure.
“Section 521(a)(2) requires a debtor to either redeem, reaffirm, or surrender collateral to the creditor,” Pryor said. “Having chosen to surrender, the debtor must drop his opposition to the creditor’s subsequent foreclosure action.”
The appeals court also said bankruptcy courts may compel debtors not to fight foreclosure.
“The bankruptcy court had the authority to compel the Faillas to fulfill their mandatory duty under section 521(a)(2) not to oppose the foreclosure action in state court,” Pryor said.
The Faillas were represented by Peter David of the Ticktin Law Group in Deerfield Beach, Fla., and Michael E. Zapin of the Law Offices of Michael E. Zapin in Boca Raton, Fla.
Citibank was represented by John R. Chiles of Burr & Forman in Fort Lauderdale, Fla., and Jonathan M. Sykes in the firm's Orlando, Fla., office.
To contact the reporter on this story: Chris Bruce in Washington at email@example.com
To contact the editor responsible for this story: Mike Ferullo at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)