NEW STATUTE IN EFFECT AS OF 10/1/18 REGARDING BANKRUPTCY AND FORECLOSURE: APPLIES TO ALL NEW FORECLOSURES FILED ON OR AFTER OCTOBER 1, 2018
Effective October 1, 2018, Florida Senate Bill 220, also known as Fla. Stat. 702.12 went into effect. One of the purposes behind this law was to curb the abusive bankruptcy filings that hinder and delay foreclosure actions. Per the statute, a lienholder, in an action to foreclose a mortgage, may submit any document the defendant filed under penalty of perjury in the defendant’s bankruptcy case for use as an admission by the defendant to show a rebuttable presumption that the defendant has waived any defense to the foreclosure. The rebuttable presumption is created when a lienholder files evidence of the defendant’s intention to surrender the subject property, and a final order in the bankruptcy case which discharges the defendant’s debts or confirms the defendant’s repayment plan that provides for the surrender of the property.
This law reinforces the already favorable decisions from the bankruptcy courts in Florida that have held that a debtor who surrenders his/her property is unable to contest the foreclosure. To go further, the Eleventh Circuit has recently held that if an election of surrender is made, the debtor is unable to contest a subsequent foreclosure, even if the foreclosure has not yet occurred. In fact, the Bankruptcy Court for the Middle District of Florida found that a Chapter 13 debtor acted in bad faith by filing a Chapter 13 and seeking to treat the property when that same debtor had surrendered the property in a previous Chapter 7 and received a discharge. The Court found this to be an extension of a foreclosure defense and violated the requirements of surrender.
Moving forward, it is imperative that PLG clients are being proactive in the bankruptcy cases (Chapters 7 and 13) in order to ensure that the following occur:
It is to PLG clients' advantage to obtain a declaration of surrender (even if the loan is current) in order to stop endless litigation in the foreclosure.