Bankruptcy Prevents Foreclosure With An Automatic Stay In Georgia

Automatic Stay of Foreclosure Auction in Georgia

IN RE: ALLISON MICHELLE PERRY, Debtor

Case Law
CHAPTER 13, CASE NO. 03-66133-MHM
UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION
2006 Bankr. LEXIS 864

March 27, 2006, Decided

Facts: Debtor's Chapter 13 case was dismissed by order entered July 25, 2005, because Debtor's plan payments to the Chapter 13 Trustee were delinquent. Those payments were delinquent because the company subject to the Employer Deduction Order in this case had deducted the payments from Debtor's payroll check but had failed to remit the payments to the Chapter 13 Trustee. Notice of the dismissal was sent to all creditors.

On August 4, 2005, Debtor filed a motion to vacate the dismissal order. That motion was calendared for hearing by Debtor's attorney for August 25, 2005. The motion and the notice of hearing were served upon all creditors, including Respondent. Respondent failed to file a written objection to the motion 1 and failed to appear at the hearing or otherwise object. In accordance with the custom and practice in this district, at the call of the calendar, Debtor's attorney announced no opposition to the motion. Debtor's attorney prepared the order and forwarded it to the Chapter 13 Trustee for review and signature. The Chapter 13 Trustee forwarded the order to the chambers of the undersigned August 30 or 31, 2005. On September 6, 2005, the foreclosure sale of Debtor's property occurred. 2 Respondent bought the property at the foreclosure sale. On September 7, 2005, the order vacating the dismissal was signed and was entered September 8, 2005.

Issue: Whether debtor is entitled to the relief

Ruling: Yes. Because the delayed entry of the order vacating the dismissal of the debtor's case was occasioned by the court, and not by any fault of the debtor or the debtor's attorney, it was appropriate to issue the order nunc pro tunc to a date prior to the foreclosure sale of the debtor's property. The equities also favored the debtor's request for nunc pro tunc relief and to set aside the foreclosure sale. The dismissal of the debtor's case was the result of the failure of the debtor's employer to properly remit her Chapter 13 plan payments to the Chapter 13 Trustee. As of the date of the debtor's motion to set aside the foreclosure sale, the debtor had tendered the due and owing mortgage payments and fees to the creditor. The delay in entering the order vacating the prior dismissal was caused by the press of business and holiday absences in chambers. The hearing was scheduled and the proposed order was presented by the debtor's attorney in ample time to allow for entry of the order before the foreclosure date. Further, the property was purchased by the creditor, and the creditor would not have been harmed by the relief requested.

Lesson Learned:Probably the most important protection afforded to debtors under the Bankruptcy Code, and the provision that generates the most litigation, is the automatic stay of 11 U.S.C.S. § 362(a). The automatic stay arises upon the filing of a voluntary petition under the Bankruptcy Code and operates to stay certain enumerated actions by creditors against the debtor or the debtor's property. The stay of actions against the debtor's property continues during the pendency of the case unless the creditor obtains relief from the stay, as provided for in 11 U.S.C.S. § 362(d), or until the property is no longer property of the estate. 11 U.S.C.S. § 362(c). The stay terminates immediately upon dismissal of the bankruptcy case.

Written by Kevin Levonas and Jerry L