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Point of View: Bankruptcy's Automatic Stay: Ms. Kuhn is an attorney in the Nashville, Tenn. office of Wilson & Associates, an Arkansas-based firm that represents mortgage lenders.
The automatic stay provision of the bankruptcy code is one of the most powerful legal tools invented. Not only does it stop any collection efforts or any new liens against an estate, it stops any civil procedure that could subject the debtor to liability cold. It has the ability to stop a foreclosure sale in a single fax, or continue indefinitely any collection court proceedings with a single notice. Yes it is that strong. It is also difficult to get the stay lifted with any semblance of timeliness.
The new bankruptcy laws are aiming to limit this by provisions not staying civil paternity suits, domestic support obligations, child custody or visitation, dissolution of marriage (except to the extent that such proceedings seeks to determine the division of the property that is property of the estate) and domestic violence. The question that this article will focus on however is the effect of the automatic stay on eviction (detainer) proceedings.
In a detainer action, the plaintiff mortgage company has already foreclosed on the property and is now proceeding to evict the former owners from the property so it can be resold. In such cases, depending on the mortgage company's policy, there may be room to negotiate a move-out timeframe or possible repurchase of the property with new financing. If this is true and the property has been foreclosed, the question still remains on how the stay will affect the proceedings. The answer (in typical lawyer style) is that it depends on when the bankruptcy was filed.
Assuming that the bankruptcy was filed before the sale then the property would have to be removed from the bankruptcy estate before the sale happens. Once the property is removed from the estate the stay is lifted as to the sale and the detainer proceedings. This is the most obvious and straightforward situation.
The next situation is where the bankruptcy is filed between the sale and the detainer proceedings. The detainer proceedings should ...
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Source: HighBeam Research, Point of View: Bankruptcy's Automatic Stay: Ms. Kuhn is an attorney...