Facts: A homeowner became delinquent on his mortgage and the lender commenced foreclosure. A buyer took title to the property at the trustee’s foreclosure sale.

Claim: After the sale, the homeowner filed a petition in Chapter 7 bankruptcy seeking to regain title to his home and claiming his bankruptcy petition protected his home from foreclosure.

Counter claim: The buyer claimed the trustee’s sale was valid since he purchased the home and held title before the homeowner filed for bankruptcy.

Holding: The ninth circuit bankruptcy appeals court held the trustee’s sale was valid despite the owner’s later bankruptcy filing since he no longer held title to the home when he filed for bankruptcy, as the trustee’s sale previously conveyed title to the buyer.

Also at issue in this case:

Facts: A homeowner obtained a loan secured by a trust deed encumbering his property. The lender assigned the trust deed to a new trustee without informing the homeowner of the assignment. The homeowner became delinquent on his loan and the property was sold to a buyer at a trustee’s sale. The owner refused to vacate and the buyer filed an unlawful detainer (UD) action which was completed.

Claim: The homeowner sought to recover title to his property, claiming the trustee’s sale was invalid since he was not notified the note and trust deed were reassigned and thus the lender was not authorized to initiate the trustee’s sale.

Counter claim: The buyer claimed the trustee’s sale was valid since he held the debt under the note and the trust deed, and had already been granted an unlawful detainer judgment.

Holding: The ninth circuit bankruptcy appeals court held the trustee’s sale was valid since the buyer held title under the trustee’s deed and had already been granted an unlawful detainer judgment awarding the buyer possession. [In re Edwards (July 12, 2011) _BR _]

Editor’s note – If your client is falling behind on loan payments and considering filing for bankruptcy, the time of filing is of the essence. To be afforded protection, the homeowner must file for bankruptcy when he still holds title to the property or risk losing it. If the homeowner no longer holds title, there is nothing left for a bankruptcy declaration to protect.