Bergman on Bankruptcy's relationship to foreclosures

By:        Nicholas Moccia, Esq.
             Law Offices of Robert E. Brown, P.C.

Bruce Bergman is a partner with Berkman, Henoch, Peterson & Peddy, P.C., who is a noted authority on New York foreclosure law.

In the N.Y. Real Property Law Journal (Summer 2010 Vol. 38 No. 3), Mr. Bergman provides some insight on the intersection of N.Y. foreclosure law and the Bankruptcy Code, and cites the following highlights:

• The Bankruptcy Code provides for an automatic stay of certain prescribed actions against a debtor's property (11 U.S.C. s. 362[a]).  This includes foreclosure actions.
• Imposition of the automatic stay is one of the fundamental protections afforded a debtor by the Bankruptcy Code.
• The stay is effective immediately upon the filing of a petition without need for further action.
• The stay is not limited to the litigants, but rather extends to a non-bankruptcy court too so that the stay serves to suspend any non-bankruptcy court authority to continue any judicial proceedings which are then pending against that debtor--including foreclosure actions.
• Proceedings which the Bankruptcy Code stays upon a petition filing are void if they take place after the stay begins.
• The power to address legal actions violative of the stay are given to the bankruptcy court itself--not the state court.

Bergman cites a particularly informative decision, namely Carr v. McGriff, 8 A.D.3d 420, 781 N.Y.S.2d 34 (2d Dep't 2004), whereby the Second Department held that the NY Supreme Courts (i.e. the state trial courts) had no power to ratify or annual a state foreclosure action commenced after the imposition of a bankruptcy stay.