First, occasionally we get inquiries, which indicate that the inquirers have concluded that there are different Bankruptcy Codes in different places in the USA. This is not true. We have one and the same Bankruptcy Code in effect everywhere in the USA. We have one set of Bankruptcy procedural rules in effect everywhere in the USA. The differences are in the local bankruptcy rules that each federal district court has adopted. This creates procedural differences (e.g. some courts allow telephonic participation while others do not allow telephonic participation at the preliminary hearing on an MFR). This office is aware of these differences and properly manages them. Also, different judges have different attitudes on MFRs (e.g. how many months must the debtor be delinquent before an MFR is appropriate? As a general rule we say three months). Nonetheless, in the mainstream, bankruptcy judges interpret the law the same.

Secondly, sometimes we are asked to do “Agreed MFRs” (i.e. We as your attorney, the debtors and the trustee prepare and sign an Order Granting Relief from Stay (OGRFS) which the bankruptcy judge signs. This can be quicker than filing an MFR, setting it for preliminary hearing (usually within 30 days of filing) and at that hearing or earlier (if no response is filed) getting an OFRFS. This seems to be common sense. Nonetheless, attorneys are involved! Beware! To get an Agreed Order, both the trustee and the debtor’s attorney must sign. Too frequently, one or both of these attorneys (trustee or debtor’s attorney) promise to sign an Agreed Order. Your attorney sends it to them to sign. They delay, delay, delay, and before you know it thirty days have past with no sign-off and now you must file the MFR and set it for hearing – another 30 days or a total of 60 days, rather than 30 days if a motion had been immediately set.

Experiences like this have forced this office to not do Agreed Orders. The simple proposition is that in the interest of saving time, we can generally get an OFRFS by notice within 30 days. A seriously contested MFR is rare. If the trustee and debtor’s attorney really agree to an OGRFS, they do not contest the MFR and we have an OFRFS within 30 days.

The most difficult situation is when is an OGRFS not necessary. First, it is clear that when a case is closed or dismissed, an OGRFS is no longer necessary because its ownership has reverted back to the debtor and it is no longer “property of the estate”. There simply is no bankruptcy to inhibit foreclosure of the property. Secondly, before a case is closed or dismissed, a bankruptcy judge signs an abandonment order (usually upon the trustee’s request), the property is similarly no longer property of the estate and foreclosure may proceed without an OGRFS. Although some bankruptcy courts do this routinely, many do not do it until the case is closed (Whether an abandonment order has entered can be determined from PACER or similar docket systems), closing a case, its dismissal or an abandonment order can take months. Therefore, they are not reliable substitutes for an OGRFS. We are back to this article’s beginning.

Some people believe that the granting or denying of a discharge is an OGRFS (Bankruptcy Code 362(c)(2)(c)) allows them to proceed without an OGRFS. This provision applies only if a creditor is proceeding other than against the “property of the estate” (e.g. against the debtor for individual liability). Generally after a bankruptcy is filed, the personal liability of a debtor is not pursued. Exceptions would be when it is known that a case is dismissed without a discharge or a discharge is denied. Consequently, the granting or denial of a discharge is meaningless because it only and maybe allows one to proceed against a debtor for personal liability, not the property. Such situations are rare to begin with (i.e. denial of a discharge) and personal liability is rarely the objective of a foreclosing creditor. A foreclosing creditor’s primary objective is to foreclose against his collateral, “property of the estate”. This means Agreed Order, closing of the case, dismissal, or, most frequently a MFR to obtain an OGRFS as discussed herein.

The rules find their most frequent application in Chapter 7 cases. With some modification, they apply in Chapters 11, 12, & 13. The exception is Chapter 11 where the debtor has a four-month period after filing to file a plan. Because it is very difficult to get an OGRFS during that period, even if the debtor is not making payments, it is generally best to wait until seven months post-petition delinquent monthly payments have accrued (i.e. 4 months exclusivity period plus 3 additional months delinquencies). This assumes sufficient equity for your mortgage. If there is little or no equity, an immediate MFR may be appropriate. If you have any questions, please feel free to contact our office at 800-842-8417; our Bankruptcy Department stands ready to assist you.