How does the borrower filing bankruptcy change my commercial foreclosure filing?
The filing of bankruptcy by a mortgagor has become a common response to a foreclosure proceeding. The mortgagor may file a voluntary petition under the Bankruptcy Code and become a debtor under Chapter 7 (liquidation), Chapter 11 (reorganization), or Chapter 13 (adjustment of debts of an individual). One of the most important and usually immediate features of a bankruptcy filing is the automatic stay. Section 362(a) of the Bankruptcy Code provides an automatic stay of most actions against the debtor’s property, including actions to realize the value of collateral securing the obligations of the borrower. Under any chapter of the Bankruptcy Code, the main concerns of the mortgagee are the same: a) the mortgagee needs relief from the automatic stay imposed by the Bankruptcy Code so that the mortgagee can complete the foreclosure proceeding, or b) the mortgagee needs to ensure adequate protection of the mortgagee’s interest, including payments when appropriate, and property treatment of a
