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» VISIT US ONLINE @ DSNEWS.COM 83 in bankruptcy. Since the Taylor decision, several bankruptcy courts in the 11th Circuit have examined the effect of a borrower fil- ing a statement announcing their intent to surrender property in a bankruptcy case … only to continue vigorously defending against the lender's right to foreclose the mortgage encumbering the surrendered property. In reaching this position, bankruptcy courts have examined the term "surrender," specifically due to the fact the Bankruptcy Code does not define the term. Courts have applied the plain meaning of the word and defined the term to mean "the act of yielding to another's power or control" or "the giving up of a right or claim." is definition is consistent with the 11th Circuit's interpreta- tion of the Bankruptcy Code and effectively means a debtor should not be entitled to prevent a creditor from enforcing a mortgage secured by surrendered property. is extends to precluding defense of a creditor's right to foreclose surrendered property. is position is tempered by the fact that courts have stated the term "surrender" does not require a debtor to deed a property to the Lender. However, debtors may not prevent a lender from exer- cising its collateral rights against surrendered property in a legal manner. Other federal circuits throughout the country have followed the 11th Circuit's inter- pretation of the Bankruptcy Code to require a debtor who intends to retain non-exempt collateral to either reaffirm or redeem the debt encumbering the collateral. If a debtor is unable or unwilling to do so, surrender is the only alternative. e 11th Circuit's approach in Taylor is currently the majority view, as the First, Fifth, Sixth, and Seventh Circuit Courts of Appeal have interpreted that the Bankruptcy Code is consistent with Taylor. Conversely, the Second, Fourth, Ninth, and Tenth Circuit Courts of Appeal have taken a "non-exclusive" approach, which would in theory allow a debtor to defend a foreclo- sure action after surrendering property in bankruptcy. In the Southern and Middle Districts of Florida, 11 judges have ruled consistent with the Taylor rationale. ese courts have held that when a debtor surrenders property pursuant to his or her Statement of Intention, he or she is no longer permitted to defend a foreclosure action against the surrendered property. ese courts have found that allow- ing a debtor to retain property after receiv- ing discharge would prejudice the lenders. is rationale emerged from a concern that a discharged debtor would lack incentive to maintain the collateral in good condition or to continue making payments if the value of the collateral exceeds the amount of the debt. e Hon. Chief Judge Paul G. Hyman of the Southern District Bankruptcy Court of Florida has issued two recent opinions on this issue. e first is a 14-page opinion in the case of In re Failla, wherein the court analyzed the definition of the term "surrender" based on the findings In re Taylor and its progeny. e court ultimately ruled that a borrower shall cease all defense and/or opposition related to the foreclosure action if a property is sur- rendered in bankruptcy. e Failla opinion, although consistent with Taylor, is currently being appealed. A second opinion stems from two orders in the case of In re Dolan stemming from a Motion to Re-Open the Bankruptcy Pro- ceeding, Compel Surrender, and for Sanction. e court granted a Motion to Compel Sur- render—ordering the debtors to withdraw all defensive pleadings and motions in the fore- closure action within 14 days or be subject to sanctions. e sanctions could have included vacating the debtors' discharge order. e court, after expressing concern with the disturbing trend of debtors obtaining relief from financial debt only to retain pos- session of collateral by vigorously defending foreclosure cases, also issued an Order to Show Cause. In light of the egregiousness of the conduct, the Order to Show Cause was issued to both the debtors and their foreclo- sure counsel, requiring both to appear before the bankruptcy court and show why sanctions should not be entered. e debtor would be required to explain why he or she was not following their sworn Statement of Intention. Counsel would be required to explain why they were counseling and aiding the debtors to violating their Statement of Intention and 11 U.S.C. §521(a)(2)(B). e In re Dolan Order to Show Cause contains findings that support the bankruptcy court's concern that foreclosure counsel im- properly assisted, and possibly counseled, the debtors into violating their sworn Statement of Intention to surrender collateral. In the face of the bankruptcy court orders, the In re Dolan debtors through their counsel subsequently withdrew all defenses in the foreclosure case and ceased all opposition to entry of a fore- closure judgment. e foreclosure judgment was entered immediately thereafter. Not- withstanding, the bankruptcy courts' Order to Show Cause is not resolved and remains pending to be scheduled by the court. In re Dolan reflects just how serious this matter has become to the courts. ey are now looking beyond the borrowers to deter- mine why these individuals are taking action that contradicts their sworn statements. e seriousness of these violations and the recent rulings from various judges across these two large districts send a clear message regarding a creditor's right related to secured collateral. e courts recognize the purpose of bank- ruptcy is to provide debtors with a fresh start not a head start. Roy A. Diaz Esq. is the shareholder of SHD Legal Group P.A., representing mortgage lenders and mortgage servicers throughout the state of Florida. Adam A. Diaz Esq. manages the firm's bankruptcy practice. Georgia RANK: 34 90+ Day Foreclosure Unemployment Delinquency Rate Rate Rate MARCH 2015 2.42% 0.89% 6.3 YEAR AGO 3.08% 1.14% 7.3 YEAR-OVER-YEAR CHANGE -21.2% -21.4% -1 Top County UPSON COUNTY 90+ Day Foreclosure Delinquency Rate Rate MARCH 2015 4.36% 3.16% YEAR AGO 5.02% 1.12% YEAR-OVER-YEAR CHANGE -13.1% 182.8% Top Core-Based Statistical Area THOMASTON, GA 90+ Day Foreclosure Delinquency Rate Rate MARCH 2015 4.36% 3.16% YEAR AGO 5.02% 1.12% YEAR-OVER-YEAR CHANGE -13.1% 182.8% note: The 90+ day delinquecy rate is the percentage of outstanding mortgage loans that are seriously delinquent. The foreclosure rate is the percentage of outstanding mortgage loans currently in foreclosure. State rank is based on the March 2015 foreclosure rate. All fi gures are rounded to the nearest decimal. The unemployment rate refl ects preliminary March 2015 fi gures released by the Bureau of Labor Statistics. All other data courtesy of LPS Data & Analytics. Georgia Marc Oppenheimer Associate Broker, CDPE / BPOR Serving REO Since 1987 5920 Roswell Rd Suite B-118 Atlanta,Ga. 30328 Phone: (770) 668-0063 Cell: (678) 296-6550 oppy@atlantareo.com www.atlantareo.com

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