Foreclosure Sale Does Not Violate the Automatic Stay if Timed Properly

PENNSYLVANIA CASE LAW UPDATE
Frequently, borrowers file for bankruptcy at the 11th hour to halt foreclosure sales. Once a petition for bankruptcy relief has been filed, secured creditors must cease their collection efforts to avoid violating the automatic stay. However, the automatic stay terminates upon a debtor’s dismissal and closure of the bankruptcy case. A Pennsylvania bankruptcy court recently ruled that if a foreclosure sale occurs between the time when a bankruptcy case is dismissed and when it is reinstated, the foreclosure sale is not void and does not violate the automatic stay.
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In In re Parker, the debtor filed a petition for bankruptcy relief to prevent a foreclosure sale of her residence. Notably, the debtor failed to file any of the required documents at the time she filed her bare-bones petition. This was the debtor’s fourth bankruptcy filing, and as such, she was familiar with the necessary documents that must be completed and filed in Chapter 13 cases.

The debtor timely filed some, but not all, of the missing documents, and the bankruptcy court thus entered an order dismissing her case. Under section 362(c)(2)(B) of the Bankruptcy Code, at the time a case is dismissed the automatic stay is terminated.

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