Bankruptcy Court Enforces the Automatic Stay Against the State Court

In addition to foreclosure defense, my firm also represents homeowners in bankruptcy proceedings throughout the Middle District of Florida.  Even though bankruptcy isn’t for everyone, I couldn’t imagine not offering this service, as bankruptcy and foreclosure often go hand in hand.  To illustrate, one of the benefits of bankruptcy is that it entitles homeowners to an “automatic stay” of their foreclosure case.  In layman’s terms, this means the foreclosure case must stop, dead in its tracks, until the bankruptcy court rules it can proceed.  As a result, it makes perfect sense for many homeowners to incorporate bankruptcy into their foreclosure defense strategies.

For example, suppose a homeowner has a trial approaching in the foreclosure case and is concerned he/she may lose.  It may make sense to file bankruptcy, right before the trial, as, that way, the state court is required to cancel the trial as the bankruptcy proceeds.  This “stay” doesn’t last forever, of course, but it’s a good way to prevent a bank from proceeding with a scheduled hearing or trial in a foreclosure case.

Typically, whenever any attorney mentions that a bankruptcy has been filed or that an automatic stay is in place, the state court judges are loathe to do anything.  That’s how federal law works – when the stay is in place, the state court lawsuit cannot proceed.  It’s an “automatic” stay – the foreclosure case automatically stops when the bankruptcy is filed.

Recently, however, I’ve encountered a judge who thought it was okay to proceed with the foreclosure case even when a homeowner filed bankruptcy.  The judge was not intending to proceed with substantive motions, but to hold a “case management conference” or a “status conference” right after a bankruptcy is filed.

That prompted me to file this motion, where I asked the bankruptcy court to require the foreclosure court to honor the automatic stay and to refrain from conducting further court proceedings in the face of that stay.  Today, I received this signed Order, granting the motion and directing the foreclosure court to refrain from any court proceedings in light of the automatic stay.

As you’re fighting foreclosure, keep this dynamic in mind.  A state court judge cannot proceed with a foreclosure case when you file bankruptcy, and if the judge tries to do so, the bankruptcy court can and likely will intervene.

Mark Stopa

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