Automatic Stay and Foreclosure Prevention

| Sep 11, 2010 | Bankruptcy |

A Northern District of Texas case involved a debtor who filed her third bankruptcy petition within the prior year.  She then filed a motion to impose the stay pursuant to section 362 to prevent an impending foreclosure of her home.  The Court orally granted the debtor’s motion. 

Before the order was entered, however, the mortgage creditor foreclosed upon the home.  The creditor did not have notice that the Court had orally granted the motion.  The debtor then moved to avoid the foreclosure as a violation of the automatic stay.  The Bankruptcy Court denied the debtor’s effort to revoke the foreclosure, finding that the plain language of section 362(c) states that the imposition of the stay under (4)(B) becomes effective only on the date of the entry of the order.  Accordingly, because the foreclosure occurred prior to the entry of the order, the mortgage creditor’s action did not violate the automatic stay.