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Keywords

settlementmotiontrustbankruptcychapter 13 bankruptcycorporationobjection

motionforeclosurebankruptcyobjection

Related Cases

In re Cheeks, 167 B.R. 817

Facts

The Debtor filed for Chapter 13 bankruptcy on January 14, 1994, after defaulting on a mortgage held by RTC. Prior to the bankruptcy filing, the Debtor entered into a forbearance agreement with RTC on July 29, 1993, which included a provision that the Debtor would not oppose RTC's motion for relief from the automatic stay in the event of bankruptcy. Following the Debtor's bankruptcy filing, RTC filed a motion for relief from the automatic stay, which the Debtor objected to, but no other interested parties filed objections.

The Debtor filed a Petition for Relief under Chapter 13 of the United States Bankruptcy Code on January 14, 1994. RTC has a valid security interest in the property which is the subject of this motion by virtue of a mortgage dated April 1, 1986 and recorded April 7, 1986, in the office of the RMC for Richland County in Book M919 at Page 852 in the original principal sum of $60,650.00.

Issue

Is the provision in the prepetition forbearance agreement, which prevents the Debtor from opposing RTC's motion for relief from the automatic stay, enforceable?

Rule

Pre-petition agreements, such as forbearance agreements, have been held to be valid and enforceable, provided they do not preclude the debtor from filing for bankruptcy but rather limit the debtor's ability to oppose specific motions related to the bankruptcy.

Pre-petition agreements such as set forth above have been held to be valid and enforceable.

Analysis

The court found that the forbearance agreement was enforceable as it did not prevent the Debtor from filing for bankruptcy but merely required the Debtor to refrain from opposing RTC's motion for relief from the automatic stay. The court noted that the Debtor had a clear understanding of the agreement's terms and consequences, and the absence of objections from other interested parties further supported the enforcement of the agreement. The court emphasized the public policy favoring out-of-court settlements and restructuring, which the forbearance agreement facilitated.

In this case, RTC had a present right to have its collateral sold in a foreclosure sale. In exchange for surrendering this right, the secured creditor obtained the debtor's agreement to lessen the delay in starting the foreclosure action over in the event the debtor defaulted on the forbearance agreement and then filed a bankruptcy petition.

Conclusion

The court granted RTC's motion for relief from the automatic stay, allowing RTC to pursue its remedies against the secured property, as the Debtor's objection was rendered ineffective by the forbearance agreement.

THEREFORE, IT IS HEREBY ORDERED: That the Automatic Stay pursuant to 11 U.S.C. Section 362 is lifted, based on the forbearance agreement entered into by the parties and there being no other objections, as to the real property described in RTC's Motion for Relief.

Who won?

Resolution Trust Corporation (RTC) prevailed in the case because the court upheld the enforceability of the forbearance agreement, which the Debtor had entered into voluntarily.

RTC shall be permitted to pursue its remedies against said security.

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