Automatic Stays

Upon filing a Petition for Bankruptcy, an automatic stay goes into effect, prohibiting any activity by the debtor, debtorís creditors, or any other party from commencing any new action or continuing any existing action against property owned by the debtor (which, upon the original filing, became property of the estate). No conveyance, encumbrance, or action to enforce any existing encumbrance or lien may be taken against the estate property as long as the stay is in effect.

 

It is not uncommon to find that the debtor filed for bankruptcy subsequent to a creditor instigating foreclosure action against him. A foreclosure in progress at the time bankruptcy proceeding is commenced is stayed; meaning that no further action may be taken with respect to the foreclosure until the stay is lifted or the bankruptcy court authorizes such action by granting relief from the stay with respect to the subject property and pending foreclosure action.

 

From a title perspective, you may rely upon a final order of the bankruptcy court which grants relief from the automatic stay when insuring title involving foreclosures of mortgages or deeds of trust.