Struggling to Surrender

Here’s what I would have blogged live if the interest in our live blogging hadn’t crashed the server and required uninstallation of the software that would allow us to be really live.

This presentation dealt with the problems that arise when the debtor wants to surrender encumbered property and the secured creditor will take no action to acquire title.

Honorable Robert Berger, KC KS; James Molleur counsel in Pratt case

Long standing problem, previously with cars, now endemic with housing.

Surrender shows up lots of places in Code. Doesn’t mean they have to turn collateral over to creditor, just make it available to creditor. 

What does surrender mean when creditor ignores it? 

Court in Pratt and Rash repeat: “you can always surrender.”

Pratt court created a theory of objective coercion.

Page 198-199 discussion of the theory. Debtor filed statement, made it available to creditor, couldn’t junk it, 

Judge noted behavior of mortgage lenders who in absence of reafffirmation won’t speak to debtor or send mortgage statements. Equally coercive.


Real Estate

Molleur: when clients simply want to move on and shed the house, if the creditor doesn’t take it back, the property acrues taxes, sewer charges, water fees, property needs to be winterized, secure it against break in. Liability for personal injury remains and insurance companies won’t insure a vacant property.

HOA dues continue to accrue. Berger decided that the non dischargeable HOA fees did not entitle the HOA to attorneys fees for the HOA; notes that there is little guidance in Colliers or anywhere else.

He filed the Canning case for Chapter 13 debtors with huge HOA fees for an old building with huge maintenance costs.

Judge: food for thought about using 363 sales for the value of the collateral. Chapter 13 debtor can use the other powers of the Code. Judge thinks the trustee and the debtor in 13 hold the Chapter 5 powers concurrently.

Look at Chapter 13 beyond just the confirmation issues.

Molleur: ideas for dealing with surrender issues

In his area, the courts don’t allow forced short sales under 363

  • short sales
  • deeds in lieu
  • Chapter 13 plan language, requiring lender to X (to accept deed, perhaps)
  • r/s order requiring lender to take certain action
  • deed house to homeless person
  • municipal ordinances that penalize or hold lenders
  • discharge injunction violation


run down house on river in Sanford, ME. Debtors elected to surrender and moved out. A foreclosure was commenced then dismissed the foreclosure. Creditor sent letter to debtor (in materials page 206 of materials) indicating they wouldn’t foreclose or pay taxes and insurance. Molleur claimed it was discharge injunction violation.


He tried it on stipulated and facts and now thinks having trial testimony on some of these subjects. What he wished he had was testimony on the motivation of creditor in doing nothing. HSBC claimed this was too quick to claim Pratt and that real estate always has some value, distinguished from the worthless car in Pratt

He got award of damages for dunning letters saying that debtors had to pay.



have evidentiary hearing and get motivation testimony. 

Have a Chapter 13 sale plan with an eye on Espinosa.