Is Automatic Stay in effect for this new case?

7 Replies

I'll preface this by saying that I know that I need to get legal advice and will do so before taking any action. This situation is on a short time fuse and I need any useful information I can get.

We purchased an NPN with a recorded NOD in NV in mid-October, 2019. The borrower had filed Ch 13 BK in 2018, which was later converted to Ch 7. Our seller received an Order granting the MFR in the summer of 2018. After that, I know that the seller offered trial loan mods and the borrower failed. Finally, they recorded the NOD in August, 2019.

Upon completion of the transfer, we continued with the foreclosure and recorded a NOS. The trustee sale is scheduled for 12/16/19. Yesterday, our trustee received communication from the borrower/debtor's attorney that she filed a Ch 13 petition on 12/11/19 and requested that we postpone the sale. I thought it was strange that it was a "request" along with the standard Notice of BK filing, which has warnings about the automatic stay.

I looked up the 2018 BK and it hasn't even been discharged yet so it's still open. Does the automatic stay from this new filing apply when there's already an Order for Relief from a current BK case? My instinct is "no" but I'm not an attorney and I want to make sure I get this one right.

I want to continue with the sale on 12/16/19 and then file any motions we need to after the sale to perfect title. We did this on another loan earlier this year and it worked beautifully.

Any thoughts, insights, or experience would be appreciated....

Originally posted by @Andy Mirza :

I'll preface this by saying that I know that I need to get legal advice and will do so before taking any action. This situation is on a short time fuse and I need any useful information I can get.

We purchased an NPN with a recorded NOD in NV in mid-October, 2019. The borrower had filed Ch 13 BK in 2018, which was later converted to Ch 7. Our seller received an Order granting the MFR in the summer of 2018. After that, I know that the seller offered trial loan mods and the borrower failed. Finally, they recorded the NOD in August, 2019.

Upon completion of the transfer, we continued with the foreclosure and recorded a NOS. The trustee sale is scheduled for 12/16/19. Yesterday, our trustee received communication from the borrower/debtor's attorney that she filed a Ch 13 petition on 12/11/19 and requested that we postpone the sale. I thought it was strange that it was a "request" along with the standard Notice of BK filing, which has warnings about the automatic stay.

I looked up the 2018 BK and it hasn't even been discharged yet so it's still open. Does the automatic stay from this new filing apply when there's already an Order for Relief from a current BK case? My instinct is "no" but I'm not an attorney and I want to make sure I get this one right.

I want to continue with the sale on 12/16/19 and then file any motions we need to after the sale to perfect title. We did this on another loan earlier this year and it worked beautifully. 

Any thoughts, insights, or experience would be appreciated....

Generally, if the court granted relief from stay, filing a new case would have no effect on the property and you could proceed with the sale. If the attorney presented you with a court order stopping the sale then of course you would stop. It's likely that the trustee of the BK from 2018 has requested that BK to be either dismissed or discharged but not yet signed by the judge and then filed. The debtor's attorney has been in contact with the trustee and knows the status. You can call the clerk of the court and get an update too.

The new filing is an attempt to stop the sale most likely. If the attorney can convince the judge to reverse the relief from stay (I've seen it done but it isn't common) then you would have to unwind the sale.

 

Account Closed I can see in PACER that the 2018 BK is almost near a normal end. The Trustee filed his final report but there's been no discharge and the most recent entry in the docket is from yesterday. The servicers have it in their mind that a BK filing automatically means that the sale gets postponed and I've adopted this view. My eyes were opened to the idea of proceeding with a sale and then seeking post-sale legal remedies to perfect the title transfer in egregiously abusive or fraudulent BK filings. It saves time, effort, and a lot more burden is placed on the fraudulent party when you do it this way. Most big banks and servicers will hesitate because they fear the consequences of making a mistake. Nobody wants to violate a stay. To them, though, time is not of the essence and these things get dragged out months and years to the benefit of the abusive BK filer.

There are a lot more details that make me believe that this borrower has abused the system for years and I'm more and more comfortable with going through with the sale on Monday.

The attorney that obtained the order for relief for the seller of the loan in 2018 is going to help us with this latest filing. I should have their review and recommendation tomorrow...

Originally posted by @Andy Mirza :

@Mike M. I can see in PACER that the 2018 BK is almost near a normal end. The Trustee filed his final report but there's been no discharge and the most recent entry in the docket is from yesterday. The servicers have it in their mind that a BK filing automatically means that the sale gets postponed and I've adopted this view. My eyes were opened to the idea of proceeding with a sale and then seeking post-sale legal remedies to perfect the title transfer in egregiously abusive or fraudulent BK filings. It saves time, effort, and a lot more burden is placed on the fraudulent party when you do it this way. Most big banks and servicers will hesitate because they fear the consequences of making a mistake. Nobody wants to violate a stay. To them, though, time is not of the essence and these things get dragged out months and years to the benefit of the abusive BK filer.

There are a lot more details that make me believe that this borrower has abused the system for years and I'm more and more comfortable with going through with the sale on Monday.

The attorney that obtained the order for relief for the seller of the loan in 2018 is going to help us with this latest filing. I should have their review and recommendation tomorrow...

I think it's a good move to use the attorney that obtained the order (for several reasons).

 

Our attorney strongly advised against proceeding with sale:

1. We were properly noticed (I'm not sure if we were for the other NPN we had)

2. This was the first sale date (it was the 2nd sale date for the other NPN we had)

3. Debtor was represented by an attorney firm that's well known for bad faith filings (the debtor was pro se for the other NPN). Our attorney advised that the debtor's attorney would not only seek to void the sale but would definitely go for sanctions if we proceeded with the sale. Even if we were to win, we'd still have to fight it out and that would cost thousands if not tens of thousands of dollars.

So, we're postponing the sale for 30 days. Our attorney will file a motion to shorten the time for notice and get our MFR heard right after Christmas if there's room on the calendar. I hate the idea of postponing the sale because the debtor's filing is so egregious but waiting 30 days is a small price to pay if we went the other route and things went bad for us.

Just to close the loop on this one....

The judge granted our MFR last week and he waived the 14 day stay. I'm trying to get more detail on the judge's demeanor and how the hearing went but I got everything I wanted so I'm happy. The debtor listed two different properties as primary residences for a couple of court docs. I'm sure the judge wasn't too happy about that.

The trustee sale that was postponed a month ago is clear to proceed tomorrow. Since the debtor is represented by an attorney firm, I doubt that there will be any more shenanigans or last minute filings....