Bankruptcy expert Leon Bayer answers real-life questions.
My mom and I have been fighting to save our home in Van Nuys, California. This is all so unfair. The house was in foreclosure. My mom filed Chapter 13 bankruptcy on October 9, 2012 to stop the foreclosure sale. But some of the required papers were missing from her court filing, so the case got dismissed.
She filed a second Chapter 13 on November 113, 2012. That case was also dismissed, for failure to file all of the required paperwork. The house was coming up for foreclosure auction once again so she filed another Chapter 13 case on January 23, 2013. It was a complete filing with all the required papers.
About two weeks later, the lender went ahead and held a foreclosure sale. It did this even though it was timely notified of the third bankruptcy. It admitted that it knew about the bankruptcy.
The sale was in complete violation of mom’s automatic bankruptcy stay. We want to sue the lender for violation of the stay. I know that on a repeat filing you still get a 30-day stay. So our rights were violated. How does she bring an action for this violation? We don’t want the bank to get away with this. They must be stopped.
Larry in Van Nuys
As far as I can see, you don’t have a valid claim against the mortgage company for a stay violation. Here’s why.
The foreclosure sale was conducted after your mom filed her third Chapter 13 bankruptcy case within 12 months. The bankruptcy court has a “three strikes rule” when it comes to repeat bankruptcy filings. The purpose of the rule is to prevent the court from being a revolving door for people who don’t follow rules and don’t have a legitimate reorganization purpose.
Your mother’s third bankruptcy filing did not create an automatic stay. There wasn’t even a temporary stay. This is because if you file for three bankruptcies within one year, there is no stay at all. The lender was free to hold a foreclosure sale and in doing so it did not violate any stay. (To learn more, see Nolo’s article Losing the Automatic Stay in Repeat Bankruptcy Filings.)
This case is a good example of the perils of filing Chapter 13 without expert help. We have written about it before in this blog. More than 99% of all Chapter 13 cases filed in the Los Angeles Bankruptcy Court without a lawyer are dismissed. Your mom has spent nearly $1,000 just on court filing fees for her three cases. What a shame.
Leon Bayer is a Los Angeles bankruptcy attorney. He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy. The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo. By answering a question on this blog, Mr. Bayer does not become your lawyer.