Lexology-

For the third time in less than two years, the Eleventh Circuit Court of Appeals has ruled that a chapter 7 debtor who does not reaffirm the secured debt or redeem the property must surrender the property. In re Woide, No. 17-10776 (11th Cir. Apr. 5, 2018).

In Woide, the debtors filed a chapter 13 bankruptcy petition, and on schedule A, listed their real property and stated: “to be surrendered.” The case was later converted from chapter 13 to 7, and the debtors did not file any statement of intention with respect to the property. After the close of the debtors’ bankruptcy case, the secured creditor initiated a foreclosure proceeding, which the debtors vigorously defended. The debtors also initiated other, separate lawsuits in state and federal court in an attempt to invalidate the note and mortgage, and they attempted to rescind the note and mortgage under the Truth in Lending Act, 15 U.S.C. § 1635. The bankruptcy court entered an order reopening the bankruptcy case and compelling surrender of the real property, specifically prohibiting the debtors from taking “any action to impede, contest, or dispute the validity or enforceability of the note and mortgage . . . including, but not limited to, any action to rescind the note and mortgage pursuant to the Truth in Lending Act, 15 U.S.C. 1635 . . . .”

After the bankruptcy court ordered the debtors to surrender the property, the debtors appealed the bankruptcy court’s order compelling surrender to the district court, and the district court affirmed. In re Woide, 2017 WL 78798, 6:16-cv-1484 (M.D. Fla. Jan. 9, 2017). The debtors then appealed to the Eleventh Circuit. In re Woide, No. 17-10776 (11th Cir. 2017). The primary issue on appeal was whether the debtors, who did not file a statement of intention regarding their property, but represented during the course of their bankruptcy case that they would surrender their house, and who did not otherwise reaffirm the mortgage or redeem the property during the course of their bankruptcy case, were still required to surrender the property.

[LEXOLOGY]

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