What is a Surrender in Full Satisfaction of the Debt Owed?
A surrender in full satisfaction of the debt owed can be a powerful tool for a debtor, but it’s important to remember that it’s not for everyone. If you are considering a bankruptcy plan, consider the impact on your unsecured creditors. The process is relatively simple, but it can cause problems if you don’t plan for it properly. For example, a debtor could choose a repayment plan that provides a large dividend to unsecured creditors. However, if a creditor is in a plan where the debtor’s secured creditors object, they may not be able to file a deficiency claim.
How To Know – What is a Surrender in Full Satisfaction of the Debt Owed?
What is a Surrender in Full Satisfaction? In a bankruptcy case, a debtor can surrender all or part of their property to a creditor. Although the creditor may not object, he is not obligated to take any action. However, if a debtor is unable to pay off the entire amount owed, he may choose to surrender some or all of his property. This process is known as a bankruptcy alternative, and if he or she cannot pay off the full amount, the bankruptcy court may consider it.
A court’s decision in Failla clarified the process of a Surrender in Full Satisfaction. The court stated that a debtor who fails to pay his or her secured creditors may surrender their collateral. This means that the creditor can repossess the collateral but can’t file a deficiency claim, which is the remaining loan balance after the collateral is sold. Further, the debtor cannot receive dividends from the sale of his or her collateral.