Foreclosure Procedures: Dot Those i’s and Cross Those t’s… Or Else

In re AMRCO, Inc., 496 B.R. 442 (Bankr. W.D. Tex. 2013) –

A mortgagee requested a comfort order from the bankruptcy court to confirm that the automatic stay did not apply to property that it had purchased at a non-judicial foreclosure sale immediately before the mortgagor filed bankruptcy.  The debtor countered that the foreclosure sale was invalid.  If the debtor was correct, the consequence was that the property would be part of the bankruptcy estate and protected by the automatic stay.

The creditor made a $175,000 loan to AMRCO secured by a lien on an undeveloped lot pursuant to a duly recorded deed of trust.  In essence the property was the debtor's only asset and the mortgagee was its only creditor.