One of the most important protections under bankruptcy law is what’s referred to as the “automatic stay.’ This law prohibits most all collection activity against someone after they file bankruptcy. It stops collection calls and letters, as well as more permanent collection efforts like foreclosures and repossessions.
The law prevents creditors from trying to collect against you or your property during the bankruptcy case, without first obtaining court permission (which is typically granted only in limited circumstances). Recently, though, a Massachusetts Bankruptcy Judge confirmed that the automatic stay also applies to bankruptcy cases filed after a foreclosure sale has already been completed.
In the case, available here, the debtor filed bankruptcy after foreclosure but before the new owner had brought an action to evict her in state court. The Bankruptcy Judge ultimately determined that mere possession of the property is protected by the automatic stay, even if the home has already been sold to a third party through foreclosure.
This added protection can be critical for some consumers. First, even if the new owner may ultimately be able to obtain court permission to resume eviction efforts, the extra time involved may be necessary to locate a new residence. More importantly, though, for homeowners who were wrongfully foreclosed on, this protection could make a bankruptcy court a more attractive venue to litigate a wrongful foreclosure case, as opposed to a state superior court. In superior court, this type of protection can only be obtained through an injunction, which can often involve risk of losing as well as significant attorney’s fees.
Of course, the venue for a wrongful foreclosure case is something that must be reviewed with your attorney prior to filing. Please call Brine Consumer Law today for a free consultation.
Photo Credit: Isaac Wedin