File Bankruptcy in Time or Face Foreclosure in Massachusetts

Avoid Foreclosure with a Timely Bankruptcy in Massachusetts

Case Law
IN RE: MARIE MAUD CRICHLOW, Debtor
Chapter 13, Case No. 04-18735-RS

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF
MASSACHUSETTS, EASTERN DIVISION
322 B.R. 229; 2005 Bankr. LEXIS 461; 53 Collier Bankr. Cas. 2d (MB) 1917
February 16, 2005, Decided

Facts: A is the highest bidder in a foreclosure sale for which mortgagee signed a Massachusetts Foreclosure Deed in his favor. Late that afternoon, mortgagor-debtor B filed for relief under Chapter 13 of the US Bankruptcy Code. On November 15, 2004, the deed was recorded at the registry of deeds. On November 17, 2004, B filed here Chapter 13 Plan which provided for payment of the default. A filed a motion to evict B and secure possession of the property arguing that B no longer had an interest in the property. B countered by saying that the step initiated by mortgagee too pre-petition to foreclose on its mortgage did not result in a sale of the property as that term is defined. B further claims that 11 U.S.C.S S 1322(c)(1)permits her to file a plan which provides for the cure of her defaults under the mortgage.

Issue: Whether mortgagor can cure default of the mortgage?

Ruling: No. The bankruptcy court found that the debtor did not offer any credible evidence that the foreclosure sale was conducted other than in accordance with the Massachusetts foreclosure laws. As such B was not entitled to the cure her mortgage default. Under Massachusetts law the sale occurred when the memorandum of sale was signed. Therefore, on the date she filed for bankruptcy relief, the debtor had lost the equity of redemption pursuant to a foreclosure sale conducted under Massachusetts law. On the date she filed for relief, the Debtor had lost the equity of redemption pursuant to a foreclosure sale conducted under Massachusetts law. As such, she no longer has the ability to cure the default under the mortgage she had given the Mortgagee.

Lesson Learned: For a mortgagor to cure a default in the mortgage under Massachusetts Law upon the filing of bankruptcy proceeding, it is important that the equity of redemption still exists. If the equity of redemption is no longer available by lapse of time, mortgagor can no longer cure a default in the mortgage.

Written by Kevin Levonas and Jerry L.