The Fifth Circuit has just issued a decision holding that a lender that foreclosed on land without seeking Court approval when it knew that the debtor had an “arguable claim of right” to title had willfully violated the automatic stay and was subject to the sanctions imposed by the bankruptcy court. The case is In re Chesnut and the opinion was delivered by Judge Clement. Here there was a question as to whether the land was in the debtor’s/husband’s estate as some title documents listed wife only as owner, but the real property was purchased during marriage presumably with community funds. The bottom line was that the lender knew that the land was claimed by the husband and it could have easily sought court approval for the foreclosure (on an expedited basis if necessary) but did not. The decision also contains an excellent review of the case law relating to the automatic stay.

Here is a link to the well reasoned decision:

http://www.ca5.uscourts.gov/opinions/pub/04/04-10919-CV0.wpd.pdf

Mike