The Northern District of Texas heard the Cunningham case in 2008 concerning a Chapter 7 debtor who filed a complaint alleging that her home was wrongfully foreclosed and sold, and seeking that the court set aside the foreclosure sale and subsequent sale of her home and/or award monetary damages and possibly other relief.
The debtor was current with her mortgage payments when she filed her first bankruptcy petition, but due to some confusion over mortgage payments the case was dismissed, with the debtor filing a second case a few days later. However, the confusion from the first case over a pre-petition arrearage spilled into the second case, and eventually the debtor’s house was foreclosed upon.
The debtor sued, alleging that this foreclosure was wrongful. The court agreed, finding that the nonjudicial foreclosure did not comply with state law, specifically the two-stop process required under the property code.
The court conducted a lengthy damage analysis, ultimately ordering the lender to pay damages equal to the fair market value minus the amount owed on the loan plus attorney fees. The debtor was ordered to pay rent to the third party purchaser out of the money she received from the lender, since the debtor had remained in the house.