DATE: November 29, 2000

SUBJECT: Elimination of 7-day stay

Bankruptcy Rule 4001 provides that an order granting a motion for relief from an automatic stay is stayed until the expiration of 10 days after the entry of the order, unless the court orders otherwise.

California Civil Code Section 2924g(d) provides for a 7-day stay after termination of any kind of court injunction or stay. The two stay periods combine to require a 17-day stay after termination of an automatic stay in bankruptcy, unless otherwise ordered by the Bankruptcy Court.

Effective January 1, 2001, California’s 7-day stay is eliminated following the lifting of Bankruptcy Court stays. The 7-day stay continues to be effective as to other court actions. Assembly Bill 2284 (Chapter 636) adds Subsection (e) to Section 2924g:

(e) Notwithstanding the time periods established under subdivision (d), if postponement of a sale is based on a stay granted under Title 11 of the United States Code (Bankruptcy), the sale shall be conducted no sooner than the expiration of the stay granted under that title

It has become common for bankruptcy court orders to almost automatically include a waiver of the 10-day stay under Rule 4001. (Note, however, that when these orders are vague as to whether Rule 4001 is being waived, which they often are, we still require compliance with the 10-day stay.) This means that we may be confronted with situations where the beneficiary wants to foreclose, or already has foreclosed, minutes after the bankruptcy stay is lifted. These situations require extreme caution.

When we are conducting a trustee’s sale, we should resist conducting a sale immediately upon a stay being lifted since it leaves no margin for error. However, in those numerous situations where this is not practical, we need to be extremely careful that all the court documentation is in order.

The end result of this is that the legislature has managed to put us right back where we were before it originally imposed California’s 7-day stay!