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Massachusetts Agencies

Annulment of Automatic Stay


Ordinarily, the automatic stay which arises when a bankruptcy is filed is addressed by a motion to lift the stay so that a foreclosure can thereafter proceed. Sometimes, however, the stay is not addressed before the foreclosure proceeds, requiring a motion thereafter to lift the stay retroactively. In Soares v. Brockton Credit Union, United States Court of Appeals, Docket No. 96-2110 the court discussed the fact that in the First Circuit actions taken in violation of the automatic stay are void (as opposed to voidable) and that for this reason obtaining an order lifting the automatic stay retroactively is given only "sparingly and in compelling circumstances." In Soares the court did not give retroactive relief against the automatic stay because it was apparent that knowledge had come to the lender during the foreclosure proceedings that the debtor had filed for bankruptcy and this fact was not brought to the attention of the land court. The court in Soaressaid "we are reluctant to reward creditors who, despite notice of a bankruptcy filing, fail for no discernible reason to notify courts in which they have initiated proceedings of the [filing of the defendant for bankruptcy protection]." The court acknowledged, however, that relief against the automatic stay could be given and that the court had the authority to give it where "the creditor inadvertently violates the automatic stay in ignorance of a pending bankruptcy."