past due and bankruptcy papers on table

I surrender. Take my house. Actually, on second thought…

The Second District Court of Appeal issued an October 2019 opinion which bolsters creditors’ rights in the recently-developing interplay of federal bankruptcy law and Florida state foreclosure laws. Specifically, the opinion addressed the effect that a bankruptcy debtor’s surrender of collateral real property has on the debtor’s ability to defend a foreclosure.

A Final Summary Judgment of Foreclosure was entered in favor of a plaintiff in a foreclosure action. On the day before the foreclosure sale, the defendant filed a petition in United States Bankruptcy Court, Middle District of Florida, under chapter 7 of the bankruptcy code. After issuing an order to show cause, the state foreclosure court took judicial notice of the s statement of intentions filed in the debtor’s/defendant’s chapter 7 bankruptcy case, and the order of discharge entered by the bankruptcy court. In the statement of intentions, the debtor/defendant elected to surrender the property being foreclosed upon. The plaintiff/creditor contended that the debtor/defendant was estopped from challenging the foreclosure judgment because he agreed to surrender the subject property in his bankruptcy case. The 2d DCA agreed and dismissed the appeal as moot. The 2d DCA stated:

Borrowers […] who have surrendered real estate in their bankruptcy cases, cannot subsequently contest a mortgage foreclosure action involving that property.

The 2d DCA cited to a recent opinion of its own in which it found a trial court had erred in the application of the doctrine of judicial estoppel to prohibit a defendant from raising a standing defense when the judicially noticed documents did not reflect the surrender of the property. But differentiating the instant case from that, the 2d DCA found that the debtor in the instant case clearly and unambiguously declared in his statement of intentions his election to surrender the subject property. As a result, the 2d DCA held that he was judicially estopped from contesting the foreclosure judgment, a holding that rendered the appeal moot and, accordingly, the appeal was dismissed.

This case serves as a cautionary tale to homeowners: if you think you may want to stay in your home, or even if you think you may later think that, do not state a desire to surrender it in your bankruptcy. Discuss this thoroughly with your bankruptcy attorney so that a prudent course may be taken, which may include filing under a different chapter than originally planned.

The above-referenced opinion was rendered in the case of Lewis v. Innova Investment Group, LLC, Case No. 2D18-2116 (Fla. 2d DCA 2019).

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