Foreclosure, Bankruptcy and Automatic Stays
After a bankruptcy petition is filed, the court issues a Notice of Filing. This Notice is effective immediately and triggers a protection for debtors called an ‘automatic stay.’ Essentially, the automatic stay freezes all activity on existing lawsuits, foreclosures, garnishments, and collection activity until the bankruptcy court proceedings are complete. Sometimes, debtors feel that their creditors have not lawfully respected the automatic stay. When that happens, they can seek relief and/or punitive damages by filing a motion with the court. A recent case provides more details to what that can look like.
Summary:
US Bank schedules a foreclosure sale on plaintiff’s investment property in Spencer, MA.
Foreclosure sale is postponed due to Chapter 13 Notice of Filing.
The foreclosure sale is postponed twice more. Eventually, US Bank files a motion for relief from stay (to pursue its state law remedies against the property).
Plaintiff files a counter motion seeking actual and punitive damages against US Bank. Plaintiff asserts US Bank violated the automatic stay by failing to seek immediate relief from stay before continuing the foreclosure sale on two additional occasions after the bankruptcy filing.
Court Findings:
The Court concluded that US Bank’s continuances were not an effort to harass the debtor, nor were they efforts to revive financial pressures on the debtor.
The manner in which US Bank pursued its foreclosure did not constitute impermissible control over property of the estate, although the debtor was free to seek state court remedies regarding the way in which US Bank conducted the foreclosure sale under Massachusetts foreclosure law.
The Court held that In re Lynn Weaver, (a similar case that was referenced in the initial filing) the ruling supra did not provide a rigid determination of a stay violation where the effect of the continuances did not harass the debtor or put additional financial pressure on the debtor.
Takeaways:
People facing bankruptcy proceedings need experienced legal counsel. At Molleur Law, we take our responsibility to you seriously. The attorneys and paralegals here operate as a team. We share our knowledge and our experience with each other so that at every step, you receive the best representation. If you have questions about your current financial circumstances, give us a call to schedule your free consultation today.
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Case is In re Rellstab, (Bankr. D. Mass 11/10/20), Case No. 17-40210.
