As creditors analyze their remedies as mortgage holders, an avenue that is not often utilized by creditors was validated by the Ninth Circuit BAP in Oya v. Wells Fargo NA, (In re Oya), 19-1095 (B.A.P. 9th Cir. Oct. 18, 2019).
In Oya, the Debtors had filed numerous Chapter 13 proceedings (six) obviously attempting, without good faith, to delay a foreclosure on their valuable home. Mrs. Oya was actually on the telephone with an agent for the mortgage company directly before the foreclosure sale to announce that she and her husband had just filed their sixth Chapter 13 case and that the foreclosure sale, scheduled for the next day, should be stopped. The mortgage company did not stop the foreclosure sale but later, realizing that it had opened itself up for a willful violation of the automatic stay under 11 U.S.C. §362(k), rescinded the sale. Even later, given the lack of good faith demonstrated by the Debtors, the bank sought not just relief from the automatic stay but also asked that the automatic stay be annulled, i.e., treated as if it never existed.
The Court, in analyzing the criteria for annulment v. simple termination, utilized factors previously considered by the Ninth Circuit, including the number of times that the Debtors filed Chapter 13, whether or not the filings were with the intention of delaying or hindering creditors, the overall good faith of the Debtors and other factors. In finding that the factors had been met, the Court annulled the automatic stay, validated the foreclosure sale and eliminated the possibility that the Debtors could seek relief for a willful violation of the stay.
This case demonstrates that the Courts will, when confronted with abuses of the Bankruptcy Code, fashion relief to protect creditors. As a practice point, we are mindful whenever we file a Chapter 13 to have all of our “ducks in a row” be reasonable certain that the client can make the payments promised and that the case has a reasonable chance of success, thereby, eliminating the problem created by the Oya’s in their numerous filings.