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Phillips Esq.
Phillips Esq., Attorney-at-Law
Category: Bankruptcy Law
Satisfied Customers: 19675
Experience:  B.A.; M.B.A.; J.D.
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Q: Bankruptcy accelerates a debt, thus, does bankruptcy

Customer Question

Q: Bankruptcy accelerates a debt, thus, does bankruptcy discharge starts the clock for the statute of limitations to foreclose after the case is closed?Details:
1)The statute of limitations to foreclose in new york is 6 years from a triggering event. The courts have agreed that a lender's acceleration of the debt constitutes a triggering event. (e.g., "However, even if a mortgage
is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute
of Limitations begins to run on the entire debt’.” Burke, 94 AD3d at 982.
"Once the mortgage debt [is] accelerated, the borrowers’
right and obligation to make monthly installments cease[s] and all sums become immediately due and payable.” Fed. Nat’l Mtge. Ass’n v. Mebane, 208 AD2d 892,894 [2d Dept 1994], etc)
Notice that in all the real estate cases that I know the acceleration was triggered either by a "notice of acceleration" by the lender or the starting of a foreclosure proceeding, this last one also being considered as a voluntary acceleration by the lender.2) Bankruptcy also accelerates the debt ( “Bankruptcy operates as the acceleration of the principal amount of all claims against the debtor” H. Rep. No. 595, 95th Cong., 1st Sess. 352-53 (1977) ).
This quote has been used in many cases involving bonds (for instance: Courts have held that the automatic acceleration that occurs upon filing bankruptcy does not as a matter of law necessarily preclude a lender from recovering prepayment premiums. In re Skyler Ridge, 80 B.R. 500, 507 (Bankr. C.D. Cal. 1987), but I could not find any one related to real estate.
Notice that in this case the acceleration of the debt is not a voluntary decision of the lender.The question: Is a debt discharged in Chapter 7 a trigger of the 6 years statute of limitations to foreclose (assume the property was not surrendered, but abandoned by the trustee to the owner because the lender refused to sign a reaffirmation agreement). If it does not triggers it, why not, and is there any case you can refer either on the positive or the negative?
Notice that answers such as "bankruptcy tolls the statute", or "bankruptcy stays the foreclosure" should be irrelevant here. I am asking about starting the clock after discharge and closure of the case. There is neither automatic stay nor tolling after the case has been closed.
Submitted: 1 month ago.
Category: Bankruptcy Law
Expert:  Phillips Esq. replied 1 month ago.

Hello: This isCustomer Welcome to JustAnswer! I am reviewing your post, and I will post my response very shortly. Thank you for your patience.

Expert:  Phillips Esq. replied 1 month ago.

The answer is a simple Yes.

Customer: replied 1 month ago.
Thanks, ***** ***** is, every expert attorney I call over the phone says no, but does not say why not, they just say: "do not believe all you read on the internet". Same with questions in free sites, they also say no, but never why no. If you could provide me a reference to an actual case that confirm that this is "a simple yes" I will increase the payment. Also, it would be appreciated if you could give some thoughts about why other experts refuse to say "yes" (see these two links:
Expert:  Phillips Esq. replied 1 month ago.

My answer is yes because if you check the covenants provision in your mortgage, you are likely to see bankruptcy/insolvency listed as one of the triggering events for acceleration of the mortgage.

Unfortunately, I cannot comment other Attorneys' answers or their reasons behind their answers because I really do not know. I can only defend my own answer.

Customer: replied 1 month ago.
The provision says that in such a case acceleration is optional. My question is if bankruptcy by itself overrides this option (even if there were no clause at all), because it automatically matures/accelerates all debts. Even without any clause, bankruptcy accelerates the debt. My question is if this interpretation is correct. I see that you based your answer in assumptions that I did not made.
Expert:  Phillips Esq. replied 1 month ago.

My response remains the same based on my years of bankruptcy and real estate practice. However, I will opt out to give another Attorney the opportunity to further assist you.