Chapter 7 creditor assignments after a case is closed

[tlawlaw]

Hypo: D files Chapter 7. Bank X has a lien on D's home. D gets its discharge. D's HOA foreclosed on D's home and it was purchased by P. But D had stopped paying on X's lien and the HOA fees for some time. D had already moved away and never to be heard from again. But now Bank X and P are fighting over whether P bought the house free and clear from Bank X's lien. A court rules P bought in violation of automatic stay. Bank X assigns its interest in the lien to Bank Y. It is now 10 years after the discharge. Neither Bank Y or P were ever involved in the bankruptcy. P reopens to the bankruptcy stay to file a motion to annul the stay violation. Bank Y opposes.

Assuming P somehow has standing. Is Bank Y a creditor in this hypo? Is there any authority that anyone knows of addressing this?

[despritfreya]

Let’s restate the facts so that they are clear.

1. Debtor files bk over 10 years ago.
2. HOA foreclosed on the Debtor’s home without getting the automatic stay lifted.
3. You purchased the home from the HOA.
4. Presumably, 10 years later, you find out that the foreclosure is void.
5. You, as the “buyer” reopen the bankruptcy to try to fix the problem.

Actions done in violation of the automatic stay are void. In re Schwartz 954 F.2d 569 (9th Cir. 1992). The mortgage lien did not go away since the foreclosure was void. Nor does it matter if the loan was sold/transferred/assigned to a different lender. Mortgages are sold/transferred/assigned every day. There is nothing wrong with that.

One would imagine that you had a title insurance policy when you purchased the home. If you did, maybe you can put in a claim against the policy despite it being 10 years later. If not, maybe you have a claim against the HOA if the SOL has not expired and/or you did not sign away your right to make a claim against the seller when you bought the property.

As to you having standing to seek the annulment of the automatic stay retroactive to the foreclosure, personally, I doubt it. The HOA wrongfully foreclosed. The HOA should be the one that tries to fix it. Further, it is no surprise that the mortgage lienholder is fighting you. I believe that under Nevada law, HOAs hold super priority liens. A mortgage lienholder would want to cure the HOA default, which it could do either before or after it forecloses.

If you have no other recourse, keep trying to get the stay annulled. Losing that argument does not put you in any worse position than you are already in.

Des.

[tlawlaw]

Des, thanks for your reply. You've restated the facts perfectly. And thank you for your advice.

In Nevada, a person with ownership interest (so purchaser in this case) can move to reopen the bankruptcy case and move for an annulment. And it often works.

But to move for annulment requires notice under 362(d). My question is is the later assignee, Bank Y in my hypo. Is this a "creditor" if it was never involved in the original BK? Does this assignee step into the shoes of the old creditor and therefore require notice under 362(d)? I can't find anything on this issue. I understand it's niche.

[despritfreya]

As I said, mortgage instruments are transferred in the ordinary course. The assignee is the creditor (who, if you are successful, would presumably have a claim back against the assignor). To be safe, I trust you listed and properly served the assignor and assignee as respondents.

Des.

[despritfreya]

Follow up. I see there is case law supporting your position.

In re Leeds 589 B.R. 186 (Bankr. Nev. 2018) (stay not annulled due to some bad facts but the good facts were similar to yours')

https://casetext.com/case/in-re-leeds-5

Possibly on the standing issue:

Relating to an appeal in In re Barrett, 2019 WL 5884234 (Bankr. D. Nev. 2019),

https://casetext.com/case/bank-of-ny-mellon-v-2298-driftwood-tide-tr-in-re-barrett

If you or your attny has not done so, you/he/she may want to pull the docket on the Barrett case. The Nevada bankruptcy case number is 08-13570 MKN. Specifically open docket number 255.

Good luck with this and keep me posted.

Des.