I. Introduction
The threat of a borrower's bankruptcy always hangs over
lenders' attempts to foreclose on real property. But until now,
lenders have become accustomed to believing that once the gavel
comes down, the threat of bankruptcy has been eliminated. A recent
decision by the Bankruptcy Court for the Central District of
California throws that belief into doubt.
In In re Gonzalez,1 Judge Mark S. Wallace
held that a borrower's bankruptcy petition can void a
trustee's sale even if the petition is filed after the
trustee's sale has been completed, as long as the borrower
files before the execution of the trustee's deed upon sale. The
Gonzalez decision is not binding precedent on any other
court, but it is a wake-up call to California lenders, foreclosure
sale bidders, and trustees that a trustee's deed should be
recorded as quickly as possible after any sale, and that further
legislative action may be needed to clarify California's
trustee sale statutes.
