March 4, 2014
by Deirdre Keady
Harmon Law Offices, P.C. – USFN Member (Massachusetts, New Hampshire)
The Bankruptcy Appellate Panel (BAP) recently issued an opinion that essentially overturned a longstanding practice in New Hampshire bankruptcy courts recognizing a debtor’s ability to include foreclosed property in a Chapter 13 reorganization, provided the foreclosure deed had not been recorded prior to the Chapter 13 filing. [TD Bank v. LaPointe (In re LaPointe), BAP No. NH 13-029 (B.A.P. 1st Cir. Feb. 24, 2014)].
Since the Beeman opinion was issued in 2009 (ruling that a debtor could file a Chapter 13 reorganization and include foreclosed property as long as the foreclosure deed was not recorded), it had become commonplace for debtors to file Chapter 13 cases post-foreclosure auction, which would then require the sales to be rescinded. Beeman was not appealed.
In the LaPointe case, the bankruptcy court denied TD Bank relief from stay to record the foreclosure deed. The facts in LaPointe were essentially the same as in Beeman. TD Bank appealed to the BAP, which ruled that the New Hampshire Bankruptcy Court erred in failing to grant the bank relief from stay and remanded the case back to the bankruptcy court to enter an order granting relief from stay. The BAP held that NH state law does not recognize a mortgagor’s right of redemption after the gavel has fallen and the memorandum of sale is signed; therefore, the bankruptcy court could not give the debtor any more rights than state law allowed.
The LaPointe case is likely to be appealed so, for now, it is still advisable to seek relief from the automatic stay prior to recording a foreclosure deed when a post-auction bankruptcy has been filed.
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