Bankruptcy Appeals Panel OKs Foreclosing Lender's Pursuit Of Deficiency Judgment Despite Failing To File Action Within State Law-Mandated 90-Day Period After Non-Judicial Sale
- Pierce v. Carson (In re Rader), 488 B.R. 406 (9th Cir. BAP 2013) -
A chapter 7 trustee objected to the unsecured deficiency claim of a mortgage lender that remained after the lender obtained relief from the automatic stay and proceeded with a foreclosure. The trustee contended that the claim should not be allowed because the lender did not comply with a state law requirement that an action must be commenced within 90 days after a non-judicial sale to preserve the deficiency claim.
The bankruptcy court overruled the trustee’s objection, and on appeal the bankruptcy appellate panel affirmed.
- As discussed in a prior blog post, under similar circumstances a bankruptcy court upheld an objection to the lender’s deficiency claim based on the effect of the same state law (see What Comes After Stay Relief: The Disappearing Deficiency Claim (Round 1)).
- The Rader courts took a diametrically opposite approach. [...] However, on a broader note, the court concluded that the state statute was preempted by the Bankruptcy Code.