Inaction by a secured creditor in a bankruptcy case can have many implications with respect to that creditor’s claim and its lien on collateral, as well as on any potential distribution from estate assets on account of the secured claim. The recent decision in Bayview Loan Servicing v. Gold (In re McLaren), 562 B.R., 309 (Bankr. E.D. Va.) emphasizes the importance to secured creditors of timely exercising all rights under the Bankruptcy Code to preserve their right to payment from estate assets against which they hold a lien.
Facts
Bank of New York Mellon, as trustee, was the holder of a note secured by a second-priority deed of trust encumbering real property owned by Timothy John McLaren. On Oct. 25, 2013, the holder of the first-priority deed of trust encumbering the real property caused ALG trustee, the trustee under that deed of trust, to conduct a nonjudicial foreclosure sale of the real property in question. The successful bidder at that sale paid $512,000 for the property. After payment of fees owed to ALG and the amounts owed under the first deed of trust, ALG held $456,802.72 in net proceeds from the foreclosure sale. These proceeds were presumably available to BNY on account of its second-priority lien.
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