Facts: A homeowner obtained a loan from a lender secured by a trust deed on their property. The homeowner defaulted and the lender recorded a notice of a trustee’s sale. The homeowner filed for bankruptcy and the trustee’s sale was stayed. The stay was dismissed and a date for the trustee’s sale was set. On the day of the sale, the homeowner filed a request for the dismissal of their first bankruptcy filing and submitted a second bankruptcy filing. The home was sold at the trustee’s sale.

Claim:  The homeowner sought to dismiss the trustee’s sale, claiming the second bankruptcy filing automatically stayed the trustee’s sale since it was filed prior to the sale.

Counterclaim:  The lender sought to uphold the trustee’s sale, claiming the homeowner was ineligible for a second bankruptcy filing since they had just dismissed the first bankruptcy filing.

Holding: A federal bankruptcy court held the trustee’s sale was valid since the homeowner was ineligible for a second bankruptcy filing. [In re Leafty (9th Cir. 2012) 479 BR 545]

Editor’s note — After unsuccessfully opposing the lender’s request for relief from the automatic stay in their first case, the borrower entered into another bankruptcy filing with the intent of stopping the pending trustee’s sale. 11 United States Code §109(g)(2) prevents this type of abusive bankruptcy filing.