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Automatic Stay Does Not Prevent an Eviction Authorized in an Earlier Bankruptcy Case

SDRandCo from morguefile.comA Chapter 13 debtor appealed a bankruptcy judge’s order granting relief from the automatic stay to a credit union, which sought to evict them after a foreclosure. The Bankruptcy Appellate Panel (BAP) for the Ninth Circuit affirmed the lower court’s order, finding that the foreclosure had been authorized during a prior bankruptcy proceeding. In re Alakozai, No. NC-12-1470, opinion (9th Cir. BAP, Oct. 2, 2013). The debtors had filed multiple bankruptcy proceedings in a relatively short span of time, the BAP found, and the credit union had obtained relief from the automatic stay in an earlier case based on a showing that the debtor was attempting to delay or hinder the foreclosure. It held that the bankruptcy court did not abuse its discretion by granting relief from the stay.

The filing of a bankruptcy petition stays most pending legal matters involving the debtors. Creditors and other interested parties may request that the court lift this stay for a specific purpose. With regard to actions affecting real property, a creditor can request relief from the stay based on a showing that the debtor is attempting to prevent the foreclosure through multiple bankruptcy filings. 11 U.S.C. § 362(d)(4)(B).

The debtors, a married couple, owned property in Dublin, California secured by a deed of trust. After the couple defaulted, the credit union recorded a default notice and scheduled a trustee’s sale. The debtors filed a Chapter 13 petition in December 2008, before the sale could occur. The court dismissed the case without confirming a plan the following May. The debtors filed three more bankruptcy petitions, one under Chapter 7 and two under Chapter 13, between January and November 2010.

While the fourth bankruptcy was pending, the credit union moved for relief from the automatic stay. The court granted the motion in January 2011, entering an in rem order that was binding on the debtors for 180 days. The court dismissed the bankruptcy case in February, and the credit union recorded the in rem order in March. The debtors filed a fifth bankruptcy petition on July 20, 2011. Later that day, the credit union held a trustee’s sale to complete the foreclosure that it had started in 2008. The court dismissed the fifth bankruptcy case, and after the debtors did not vacate the property, the credit union filed a forcible detainer action in September 2011.

While the forcible detainer case was pending, the debtors filed their sixth bankruptcy petition, the one heard by the BAP, in April 2012. The court granted the credit union’s motion for relief from the automatic stay. On appeal, the BAP found that the bankruptcy court did not abuse its discretion by lifting the stay. Congress, it noted, added § 362(d)(4) to the Bankruptcy Code in 2005 to prevent debtors from using repeat bankruptcy filings to delay foreclosure or forcible detainer. The bankruptcy court’s order, the BAP found, was within its discretion under this statute.

Bankruptcy attorney Devin Sawdayi has represented clients in Los Angeles who have found themselves without sufficient income to service their debts since 1997, guiding them through the Chapter 7 or Chapter 13 process so they can rebuild their finances with dignity and respect. To schedule a free and confidential consultation to see how we may help you, please contact us today online or at (310) 475-9399.

More Blog Posts:

Los Angeles Bankruptcy Court Rules on Whether Automatic Stay in Personal Bankruptcy Applies to Corporation Owned by Debtors, Los Angeles Bankruptcy Lawyer Blawg, February 22, 2014

Failure to Disclose Lease of Residential Property in Chapter 13 Bankruptcy Proceeding Results in Prison Sentence for California Debtor, Los Angeles Bankruptcy Lawyer Blawg, January 7, 2014

Evictions During Bankruptcy Under California Law, Los Angeles Bankruptcy Lawyer Blawg, November 29, 2013

Photo credit: SDRandCo from morguefile.com.