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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People in bankruptcy, called debtors, have two basic options for dealing with a homestead or other real estate secured by a mortgage.
They can "reaffirm" the mortgage debt and continue making payments. Or, more typically, they surrender the property so the bank can resume foreclosing or a bankruptcy trustee can sell it if there is any equity.
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.
But Troutt didn't surrender the house, which had been in foreclosure since 2009. Instead, she continued fighting U.S. Bank in state court even though she had admitted in bankruptcy court that she owed the lender $205,000.
Last June, the bank moved to reopen the case, saying Troutt should be required to honor her surrender agreement. Judge Kimball granted the motion.
Although Troutt had "admitted the validity of the debt and the mortgage," Kimball said, "she used the wildcard exemption … while having no intention of actually giving up the real property."
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.
A judge ordered them to turn over the property; they are appealing the decision and remain in the house.
In their orders, both South Florida judges built on earlier rulings by Williamson in Tampa. He has faced several recalcitrant debtors, including Lisa Metzler.
Three years ago, Wells Fargo began foreclosing on Metzler's Gibonston townhouse. She declared bankruptcy and agreed to surrender the house under terms of a Chapter 13 plan to repay other creditors.
Williamson confirmed her plan, and Wells Fargo went back to court to finish foreclosing. But Metzler continued to fight even though the bank said she had not made a mortgage payment since 2010.
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.
Williamson granted the motion and dismissed the case. But he reopened it last month so he could issue an opinion to "provide guidance" to other people in bankruptcy.
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.
Metzler did not return calls for comment.
Hywel Leonard, a Tampa lawyer who has represented numerous lenders, thinks Williamson's opinion could lead to more cases being dismissed for failure to surrender property.
There's no way of knowing the total number of pending cases in which surrender is an issue because court clerks don't track those.
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."
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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.
By the time Andolino declared bankruptcy two years ago, the house, an investment property, was in foreclosure with at least $600,000 owed on it. Andolino agreed to surrender the house as part of his proposed Chapter 13 repayment plan.
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.
He did neither. Instead, he hired a lawyer and continued fighting the foreclosure.
In an email to the Tampa Bay Times, Andolino said "the bank delayed taking surrender of the property" because it wanted to renegotiate his loan.
"The documentation for the surrender … is already with the bank, and I have been advised that the bank has elected to file my surrender," he said.
Andolino, 44, did not respond to calls and emails asking for clarification. Records show that he continues to fight the case, with a trial set for June 19.
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.
Andolino, who now has a used car business in New Port Richey, was asked by email why he collected thousands of dollars in rent yet hadn't made a payment on his loan in five years.
He did not respond.
Contact Susan Taylor Martin at firstname.lastname@example.org or (727) 893-8642. Follow @susanskate.