When Lisa Metzler declared bankruptcy in 2012, she was so delinquent on her mortgage that she agreed to surrender her Gibsonton townhouse so the bank could proceed with foreclosure.
By agreeing to give up the home, Metzler was allowed to keep $5,000 worth of personal property.
That was in federal court, which handles bankruptcy cases. Yet in state court, Metzler hired a lawyer and continued to fight the foreclosure. She still has her house. So do some other debtors who promised to surrender their homes but kept battling the bank.
That’s not fair, lenders are starting to argue. When people say they are going to surrender property, they should do so or face a penalty. It’s an argument that’s finding a receptive ear among a small but growing number of bankruptcy judges.
Last year, Judge Michael G. Williamson in Tampa threw out Metzler’s bankruptcy case because she kept trying to block foreclosure.
“At a minimum,” he wrote in a recent opinion, “ ’surrender’ means a debtor cannot take an overt act that impedes a secured creditor from foreclosing its interest in secured property.”
In a similar South Florida case, Judge Erik Kimball put the issue more bluntly: “When a debtor says, ‘(I) surrender,’ that means you need to throw up your hands and not fight anymore.”
Some debtors fight to keep houses they don’t even live in.
Former Clearwater Beach real estate agent Michael Andolino agreed in bankruptcy court to surrender a waterfront home he bought as a rental property.
But after his bankruptcy case was closed, Andolino resumed battling the bank in state court. He hasn’t made a mortgage payment in five years, yet he continues to collect rent each month.
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