Baxter v. Sarmadi

Summarized by Dean Langdon , DelCotto Law Group PLLC
10 years 10 months ago

Citation:

File name 15a0295n.06; Docket No. 14-5633

Tag(s):

Ruling:

Affirming the Bankruptcy Appellate Panel (BAP), the Court of Appeals held that the automatic stay was properly annulled based on the debtor's lack of good faith and failure to adequately protect the creditor's interest. Accordingly, the post-petition foreclosure sale was valid.

Procedural context:

The debtor appealed from a decision of the Sixth Circuit BAP, which had affirmed a ruling by the Bankruptcy Court for the Western District of Tennessee.

Facts:

Sarmadi purchased a secured note and deed of trust secured by property owned by Baxter (the debtor), after their prior business relationship soured. Baxter did not respond to demands for payment, so Sarmadi foreclosed on May 23, 2013, purchasing the property at the foreclosure sale. However, Baxter filed a Chapter 13 petition on May 22, 2013. Although Baxter claimed Sarmadi's attorney was notified, her attorney was able to establish that he did not have actual notice prior to recording the foreclosure deed. In determining that annulment of the stay was proper, the bankruptcy court found 1) Baxter's plan did not propose to pay Sarmadi's claim; 2) there was no insurance on the property, even though it was leased to a third party; and 3) Baxter lacked good faith in filing bankruptcy. In addition to providing for payment of Sarmadi's claim, other facts which related to a lack of good faith were a) Baxter's estimate of the property value was substantially higher at a hearing than listed in his schedules; b) Baxter provided critical documents only at the last minute; and c) Baxter testified he did not know he was supposed to make regular payments under his Chapter 13 plan.

Judge(s):

Siler, Moore and Stranch; opinion by Stranch

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