Bankruptcy judges get tough on debtors who don’t surrender property gas jet size chart

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.

Debtors are allowed to keep, or "exempt," $1,000 worth of furniture, jewelry and other personal property except when a homestead is being surrendered. In that case, the debtor can keep $5,000 in personal property, a substantial amount given that personal items are valued for bankruptcy purposes at yard sale prices.

Cheryl Troutt of Stuart claimed the full $5,000 exemption — the so-called "wild card exemption" — when she agreed to surrender her home two years ago. She got a discharge, meaning most of her debts were forgiven, and her bankruptcy case was closed.

Repeatedly warned to "play by the rules," Troutt finally agreed to stop her state court case against the bank. However, the bank is seeking sanctions against her and she faces possible revocation of her discharge — "a horrible remedy," the judge told her, because "creditors can literally pursue you forever."

In another South Florida case, a Boca Raton couple kept $10,000 in personal property — $5,000 each — after they, too, agreed to surrender their home. But they continued fighting the lender in state court even though they hadn’t made a payment on their $500,000 mortgage since 2009.

Metzler’s action "disavowed her representations to this (bankruptcy) court and show that her confirmation was procured by fraud," an attorney for Wells Fargo alleged in a motion asking the judge to revoke confirmation of the Chapter 13 plan.

Referring to Metzler and a Tampa debtor who also failed to surrender property, Williamson found that both "plainly took overt acts" to prevent lenders from foreclosing. Although bankruptcy law does not define "surrender," Williams agreed with two appeals court rulings that "surrender … requires a debtor to relinquish secured property and make it available" to the bank or other secured creditor.

But, "I sense that you’re going to see a number of other creditors beginning to pick up on this as a line of attack rather than be mired in state court where things move extremely slowly," Leonard said. "This has the benefit of asking the bankruptcy court to revisit the issue of whether (debtors) are entitled to discharge of their debts if they haven’t lived up to representations they made to the court."

One debtor who said he would surrender property but did not has avoided any penalty. At the peak of the real estate boom in 2005, Michael Andolino paid $875,000 for a waterfront house near his own home in Clearwater’s upscale Island Estates.

However, Andolino was unable to carry out the plan, so his case was converted to a Chapter 7 liquidation. At that point, according to the bankruptcy code, he should have declared his intention to either make mortgage payments or surrender the house.

In the meantime, Andolino has been renting the 2,600-square-foot pool home to a family from Texas. A woman who answered the door recently said that she found it on Craiglist and that Andolino had told her it was in foreclosure. She would not say what the rent is, but on his 2013 bankruptcy filing, Andolino reported $19,2000 in rental income for the first seven months of that year.