Bankruptcy judges are sending a strong message to homeowners: They will face penalties if they surrender their property to get bankruptcy protection and keep fighting in state court to save the same homes from foreclosure.
Some U.S. bankruptcy judges, including Chief Judge Paul Hyman Jr. in the Southern District of Florida and Judge Michael Williamson in the Middle District of Florida, are issuing precedent-setting rulings they say will give debtors a chance at a clean slate—not a leg up—on creditors in other courts.
“Surrender must mean something,” Williamson wrote in a May 13 consolidated opinion of two bankruptcy cases, In re Metzler and In re Patel, now at the center of a heated debate over a term not defined in the bankruptcy statute.
To judges like Hyman and Williamson, surrender means relinquishing property to “make it available to the secured creditor by refraining from taking any overt act that impedes” foreclosure.
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