For the true procrastinator: trying to get your foreclosed house back through bankruptcy court

Some folks just love to wait until the last minute to get improtant things done. And then there are those folks who wait until after the last minute . . .

In the world of bankruptcy law, it has long been thought that there is nothing that can be done to recover a house that has already gone through a foreclosure sale. Once the auctioneer’s hammer comes down, don’t think about trying to get that home back.

Or maybe that’s not absolutely true?

Last month, in a commercial case, a Dallas bankruptcy judge reversed a foreclosure sale after it occurred in the Whittle case. The bankruptcy judge ruled that the foreclosure sale it self was a preferential transfer, or in bankruptcy-speak, a “preference.”

Preferences can be set aside in bankruptcy court, provided that they occur within ninety days before the bankruptcy case is filed in court.

So this gives at least a glimmer of hope to those procrastinators who didn’t get their case filed before the hammer fell.

Now for the catch: this ruling is a pretty novel one. Other judges in other parts of the country have already rejected this line of reasoning. There is no telling if a bankruptcy judge in New Hampshire or Massachusetts would even consider this type of argument, and they are certainly not bound by the Texas case.

So, procrastinators beware! If you are going to use the bankruptcy system to try to save your home, you are still a lot better off filing the bankruptcy case before a foreclosure sale takes place!


By Doug Beaton

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