In In re Wright, an opinion issued from the United States Bankruptcy Court for the Eastern District of Michigan, the Debtor filed a Chapter 13 bankruptcy case the day before a condominium lien foreclosure sale. No notice of the bankruptcy filing was given to the Association until the day after the sale was held. The condominium unit was titled solely in the debtor’s husband.
The Association filed a motion to confirm the absence of any automatic stay as to the Association and the condominium unit. The debtor opposed the motion on the ground the debtor had an equitable interest in the unit and a possessory interest, both of which are property of the estate. The court granted the Association’s motion, on two independent grounds.
First, the debtor had no interest in the property. Although the debtor claimed an equitable interest under a theory that it was part of her “marital estate” or because she had a constructive trust against the property, the court rejected both of those arguments. The court held her possessory interest derived from permission of her owner-husband and the foreclosure sale did not interfere with that right.
Second, the court held, based upon Easley v Pettibone Michigan Corp, 990 F2d 905 (6th Cir 1993), the debtor unreasonably withheld notice of the bankruptcy filing and the Association would be prejudiced if the debtor could use the filing to avoid the sale after the fact.