Lender Alert: Bankruptcy Court Concludes that a Lawful and Non-Collusive Foreclosure Sale Is Not a Preference

Lender Alert: Bankruptcy Court Concludes that a Lawful and Non-Collusive Foreclosure Sale Is Not a Preference | Michael L. Moskowitz

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent decision of particular relevance to mortgage lenders, Veltre v. Fifth Third Bank, 2017 WL 387361 (Bankr. W.D. Pa. Jan. 27, 2017), the United States Bankruptcy Court for the Western District of Pennsylvania held that property sold at a properly conducted and non-collusive foreclosure sale may not serve as the basis for a preference action under section 547 of the Bankruptcy Code. This decision focuses attention on the debate over whether a creditor who forecloses on real property receives a preference or fraudulent transfer, even if the foreclosure sale complied with applicable state law.

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