Avoid Foreclosure with a Timely Bankruptcy in Alabama

Timely bankruptcy prevents foreclosure in Alabama

In re CASSANDRA MORGAN, Debtor.

Case Law
Case No. 06-30531-DHW, Chapter 13
UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF ALABAMA
2006 Bankr. LEXIS 1838

August 9, 2006, Decided

Facts: The creditor held a mortgage on and conducted a foreclosure sale of the debtor's residence at 12:45 p.m. on May 11, 2006. The debtor filed a chapter 13 petition at 4:45 p.m. on May 12, 2006. The foreclosure deed was not recorded until after the petition was filed. The debtor proposed to cure the prepetition arrearage and make post petition mortgage payments. The court granted the creditor's motion for relief from the stay so that it could proceed with ejectment proceedings.

Issue: Whether filing of the chapter 13 petition allows debtor to cure the arrears?

Ruling: The court held that the debtor, at the time she filed the petition, did not have an interest in the realty sufficient to allow her to cure the arrearage and maintain payments on the mortgage because the foreclosure sale had already been conducted. The court held that, pursuant to 11 U.S.C.S. § 1322(c), a foreclosure sale conducted in accordance with applicable nonbankruptcy law terminated the debtor's right to reinstate the mortgage on her principal residence.

Lesson Learned:To cure the arrears in accordance with the filing of Chapter 13 petition, it is important that a foreclosure sale has not yet been done.

By Kevin Levonas and Jerry L.