Thursday, February 26, 2015

'Bad Faith' Costs Consumer Automatic Stay Protection, Bankruptcy Panel Rules

By Michael Fuller, The Underdog Lawyer ®

Last week, the Bankruptcy Appellate Panel for the Ninth Circuit affirmed an order annulling the automatic stay in a consumer bankruptcy case.


The consumer, Jamshid Sazegar, filed an emergency chapter 13 petition, in hopes of stopping the sale of his Beverly Hills property to a potential buyer.

However, Sazegar never notified the buyer he filed bankruptcy.

The chapter 13 case was ultimately dismissed because Sazegar didn't file the necessary paperwork and failed to appear at his meeting of creditors.

Almost three years later, after the Beverly Hills property was sold to the buyer, Sazegar argued that the automatic stay in his prior case voided the sale.


Section 362(a) of the Bankruptcy Code triggers an automatic stay that generally protects consumers from losing their property to sale or foreclosure while in bankruptcy. However, section 362(d) allows the automatic stay to be annulled in the interests of fairness.

The appellate panel affirmed the bankruptcy court's order granting the buyer's motion to annual the automatic stay.

The panel determined that the equities favored granting the buyer's motion because the consumer failed to fulfill his duties under the Code and never provided notice of his case to the buyer.