Your client’s statement that he is surrendering property in his bankruptcy case is nothing more than a statement of future intentions.
Intentions can be changed, and action is required to actualize that intention.
An intention does not serve to transfer the property from the debtor to the secured creditor, or any one else.
Yet all too many people think checking the box on the statement of intentions operates to divest them of title.
Surrender in operation
I was reviewing a draft bankruptcy petition for a new lawyer where his client’s husband had just gotten a discharge in a Chapter 7 case. The husband’s schedules had elected to surrender a piece of jointly owned real estate where he was merely an accommodation party on the loan for a relative. My young friend proposed to exclude this property from the wife’s Chapter 13. [Remember, I practice in a community property state where property acquired during marriage is presumed to be community property.]
Whoa! Just because the husband announced he did not intend to attempt to keep the property, that announcement did not divest him of title. It is just a statutorily required courtesy to the secured creditor who then does not have to guess the debtor’s intentions.
Likewise, the grant of relief from stay does not take the debtor off title to the real property involved. It simply lifts the bankruptcy court injunction that that interposed itself between the debtor and the secured creditor.
Surrender doesn’t end liability
This distinction between intention and a legally effective transfer is important not only for purposes of the schedules. It is worth thinking about in terms of the general liability of a property owner.
The debtor remains the owner until sale, foreclosure, or deed in lieu. He has exposure for injuries that occur on that property while he holds title and is well advised to maintain insurance covering public liability until the point when the property belongs to another.