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ARTICLE · 07 AUGUST 2013

Foreclosure Sale As A Preference: "Strong Arm" Powers Strike Again

Pepper Hamilton LLP
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An individual debtor in a chapter 7 bankruptcy brought an adversary proceeding seeking to recover from a mortgagee for negligent misrepresentation and to set aside a pre-petition foreclosure sale as a preference.

United StatesReal Estate and Construction
Vicki Harding
Vicki Harding

Nguyen v. Wells Fargo Home Mortgage (In re Nguyen), 490 B.R. 230 (Bankr. S.D. Tex. 2013) –

An individual debtor in a chapter 7 bankruptcy brought an adversary proceeding seeking to recover from a mortgagee for negligent misrepresentation and to set aside a pre-petition foreclosure sale as a preference.  The court held that the debtor did not have standing to bring the negligent misrepresentation claim, but did allow him to pursue the preference claim.  The court then denied the lender's motion for summary judgment on the preference claim.

The debtor erroneously sent a personal check for payment of overdue amounts (since the lender did not accept personal checks), and claimed that when he spoke to the lender he was told that the payment was being processed.  Instead the lender was proceeding with a foreclosure sale.

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