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Failure to file bankruptcy petition in time leads to sale of couple’s house in foreclosure

New York Judge rules to uphold the sale of a New York couple’s home even though the couple filed for bankruptcy relief and protection. The New York Law Journal reported in an October 12th, 2012 article that the couple filed for bankruptcy only hours after their home was foreclosed upon, yet the court would not vacate the sale.

The couple filed for a Chapter 13 bankruptcy in the afternoon of July 5, 2012 believing that their home was slated to be sold in a foreclosure sale on July 9. Unfortunately, the couple was mistaken and the home was sold on the morning of the 5th while the couple was completing the bankruptcy paperwork.

Upon learning of their home’s sale, the couple petitioned the District Bankruptcy Court seeking for the sale to be vacated on two grounds. The first was that the property was the primary residences of the couple and that under bankruptcy laws the property was protected from creditors once the bankruptcy petition was filed. The second ground was that the home was estimated to be worth roughly $125,000 yet was sold for $66,000. The couple argued that the lower amount was grossly low compared to the property’s value and therefore, should be void and vacated.

The judge ruled against the couple staying that the since the petition had not yet been filed the property was not protected at the time of the sale. Furthermore, the property sold for around 50% of its estimated fair market value which is seen to be lawful. The judge reasoned that only property sales where the property sold for around 10% of their value were found to be unlawful. Based on this reasoning the judge ruled that the property sale shall be upheld.

Jayson Lutzky has over 29 years of experience. If you are considering bankruptcy, call us today at (800) 660-LAWYER(5299) to set up a free initial consultation. You can also visit us on the web at www.BankruptcyNYC.com.

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