► In This Issue:

• The Unlisted Creditor and the Interplay of §§ 523(a)(3) and 726(a)(2): A Circuit Split Continues
• The Surrender of Collateral in Bankruptcy: What Does “Surrender” Really Mean? Part I
• Attacks on Stale Claims Continue to Dominate Courts’ Attention
• Adjusting To and Navigating the New Bankruptcy Forms: A Debtor Attorney’s Perspective
• Now Available: Recording of Annual Spring Meeting Committee Session

The Unlisted Creditor and the Interplay of §§ 523(a)(3) and 726(a)(2): A Circuit Split Continues

Richard John Cole, III Cole & Cole Law, P.A Sarasota, Fla.

In a no-asset chapter 7 case, an unlisted debt is generally discharged. However, the outcome is much less favorable to debtors in asset cases where a known creditor is omitted from the schedules. This leaves debtors with potentially staggering debts after receiving a discharge and surrendering assets to the trustee simply because they did not list a particular creditor, regardless of the reason for their failure to do so. Sometimes the assets surrendered are in such trivial amounts they would have resulted in the unlisted creditor receiving a limited or no distribution had they been properly listed and filed a claim, but the debtors are potentially left burdened for years by what was often only a mistake or a typo.
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The Surrender of Collateral in Bankruptcy: What Does “Surrender” Really Mean? Part I

Shannon Doyle eBankruptcy Assistants, Inc. Long Beach, Calif.

Dennis J. LeVine Kelley Kronenberg Tampa, Fla.

Sharon J. Loftspring U.S. Bankruptcy Court (W.D. Mo.) St. Louis

It is not uncommon for debtors in a chapter 7 case to express their intent to surrender collateral in their statement of intention. In chapter 13 cases, debtors may propose in their plan that they will surrender collateral. In either case, there are instances when a debtor actively defends a state foreclosure action after either receiving a discharge or surrendering the property. This article will address the question of whether such debtor has the right to take action to oppose the foreclosure of the collateral it has purportedly surrendered.

Applicable Law Bankruptcy Code § 521(a)(2) provides that the debtor must file a written statement regarding secured collateral indicating that he or she will either redeem, reaffirm or surrender it. Section 1325 provides the requirements for confirming a plan. With respect to secured claims, if the debtor is unable to comply with § 1325(a)(5)(A) or (B), then § 1325(a)(5)(C) provides that “the debtor surrenders the property securing such claim to such holder…”

Although “surrender” is not defined in the Code, this definition has been widely accepted:

[S]urrender, at a minimum, requires a debtor to relinquish secured property and make it available to the secured creditor … i.e., not taking an overt act to prevent the secured creditor from foreclosing its interest in the secured property.

Prevailing View
Thus, debtor’s counsel beware: A new foreclosure theory has emerged in Florida forging a rather harsh majority view that when a debtor elects to surrender property in his bankruptcy schedules, he is, in effect, relinquishing rights to defend against a foreclosure action. A proposal before the Florida legislature to amend Fla. Stat. 702 to this effect did not pass, but a majority of bankruptcy judges in Florida do not agree with the legislature.

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Attacks on Stale Claims Continue to Dominate Courts’ Attention

Alane A. Becket Becket & Lee LLP Malvern, Pa

William A. McNeal Becket & Lee LLP Malvern, Pa

In recent times, proofs of claim, especially those filed by consumer lenders and debt purchasers, have come under increased scrutiny. Rule 3001 of the Federal Rules of Bankruptcy Procedure (FRBP) has been amended twice since 2010 to define more specifically what information is required to be included with claims. Generally, the amended rule continues to require “the writing” upon which the claim is based. For an individual debtor, if “in addition to its principal amount, a claim includes interest, fees, expenses, or other charges incurred before the petition was filed,” an itemized statement of such charges must be included.

If the claim is based on an open-end or revolving account, information is required to identify the original creditor, the current creditor, the charge-off date, the last transaction date and the last payment date. The Advisory Committee Notes to Bankruptcy Rule 3001 explain: “Disclosure of the information required by paragraph (3) will assist the debtor in associating the claim with a known account. It will also provide a basis for assessing the timeliness of the claim.”

The law regarding the effect of the filing of a proof of claim is well settled. A properly executed and filed proof of claim is presumed to be valid. The official form for proofs of claim requires the following acknowledgments: “I have examined the information in this Proof of Claim and have a reasonable belief that the information is true and correct. I declare under penalty of perjury that the foregoing is true and correct.”
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Adjusting To and Navigating the New Bankruptcy Forms: A Debtor Attorney’s Perspective

Jane H. Downey Moore Taylor Law firm, P.A. West Columbia, S.C.

“If you don't like something, change it. If you can't change it, change your attitude.” — Maya Angelou

On Dec. 1, 2015, the new bankruptcy forms went into effect. For creditors’ attorneys, the most notable of these forms is the proof-of-claim form. For debtors’ attorneys, the documents filed to commence the bankruptcy case are the ones that have most drastically changed. My initial impulse was to resist embracing the forms. Over time, as with most changed matters, they are becoming second nature, familiar territory, and as a result are more acceptable to me.

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Now Available: Recording of Annual Spring Meeting Committee Session

The Consumer Bankruptcy Committee paired with the Health Care Committee at the recent Annual Spring Meeting in Washington, D.C. to present a session title “Who Pays the Price for Health Care Insolvencies: the Consumer, the Vendors or the Public at Large?.” Speakers for this session included Louis E. Robichaux, IV (Deloitte Transactions & Business Analytics LLP; Dallas); Thomas A. Waldrep, Jr. (ret.) (Womble Carlyle Sandridge & Rice, LLP; Winston-Salem, N.C.); Scott A. Zuber (Chiesa Shahinian & Giantomasi PC; West Orange, N.J.); and Clifford A. Zucker (CohnReznick Advisory Group; Edison, N.J.).

Materials for this session can be found online.

Click here to watch this educational session recording.