by Bank of America’s failure to provide the debtor with a written reaffirmation agreement during the pendency of her bankruptcy led the court to deny its motion to reopen and compel surrender. In re Rodriguez, No. 12-12043 (Bankr. S.D. Fla. Aug. 12, 2015).
In her chapter 7 petition, the debtor elected to reaffirm her secured debt to Bank of America. However, she obtained her discharge without having received a reaffirmation agreement from the bank. Three years after the case was closed, Bank of America moved to reopen to compel the debtor to surrender her property and cease her defense of the foreclosure action it had initiated in state court.
The court began with the creditor’s motion to reopen. “When deciding whether to reopen a closed case, courts generally consider the benefit to creditors, the benefit to the debtor, the prejudice to the affected party, and other equitable factors. In re Arana, 456 B.R. 161, 172 (Bankr. E.D. N.Y. 2011).” A court may also consider the availability of relief from another forum, the amount of time elapsed between closure of the case and the motion to reopen, and whether the estate has been fully administered.
As a factual matter, the court found that Bank of America did not present Ms. Rodriguez with a reaffirmation agreement prior to her discharge and, by its motion to compel surrender, it was seeking to bypass the debtor’s defenses to its foreclosure action. The court found that there was no authority for reopening the case and, in fact, taking such action would reward Bank of America for sitting on its rights during the debtor’s bankruptcy. The foreclosure action represented an alternative basis for obtaining satisfaction of the debt. The court also found that the doctrine of laches warranted denial of Bank of America’s motion. Bank of America sat on its rights under section 521(a)(2) to compel reaffirmation of the debt, and then took no action against the property until three years after the case was closed. The court found that there was no excuse for the delay and that it prejudiced the debtor.
The court went on to find that even if Bank of America had succeeded in reopening the case, it would not be entitled to an order compelling the debtor to surrender the property. Had Bank of America chosen to address the debtor’s non-reaffirmation during the course of her bankruptcy, the proper method, absent compelling circumstances, would have been through a motion for relief from stay. The court found that there were no compelling circumstances to justify the bank’s requested relief. Ms. Rodriguez did not elect to surrender and though she did elect reaffirmation, Bank of America did not present her with a written agreement and, therefore, she did not “refuse” to sign. Thus the cases cited by Bank of America were inapposite.
The court left Bank of America to pursue its rights in the state court where its foreclosure action was pending.
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