Legal Question in Real Estate Law in California

You're not a bona fide purchaser if there were recorded documents to put you on notice that the title you received was subject to dispute, or a bankruptcy stay.

Even as to a secured creditor, once a bankruptcy is filed an automatic stay applies even when the creditor has had no notice. The law basically requires the creditor to check to see whether bankruptcy has been filed. If the creditor knew or should have know that bankruptcy was/would be filed, he can be liable for damages for acting against the property involved. The same rule applies against you, you are deemed to have notice and be aware that the sale of the property is illegal. Since it is treated as though the bankruptcy was filed and recorded, you would not be a bfp as to the owner. You should be entitled not only to all your money back as to the purchase price but also all the costs invovlved, such as cashier check charge, interest lost, etc. The auction company probably will not want to pay you any of your costs so you might have to sue them in Small Claims Court [you will need to do some legal research to find case law or similar cases to convince the judge to find for you as to those incidential damages].

You can get your money back, or, if no one had notice of the bankruptcy filing at the time of the sale -- and you got a good deal -- you could file a motion in bankruptcy court for retroactive relief from the automatic stay. I am currently in the middle of one of these for a client.

Mr. Roach is correct, insofar as he goes. If there had been a notice of the bankruptcy case recorded in the county where the property is situated, prior to the recording of the foreclosure trustee's deed to you, you could not be a bona fide purchaser without notice. However, he omits discussion of the other side of the coin. Mere filing of a bankruptcy case is not effective notice, without more, and you can be a BFP without notice and very likely are.

I'm not a bankruptcy expert, but based on a little research I think Messrs. Shers and Stone are wrong.

If a notice of the bankruptcy petition is not recorded, a purchaser at the foreclosure sale who otherwise does not have notice of the bankruptcy would be a bona fide purchaser and protected by the Code's safe-harbor provisions. The applicable law is 11 U.S.C.A. 549(c), which reads as follows:

"The trustee may not avoid under subsection (a) of this section a transfer of an interest in real property to a good faith purchaser without knowledge of the commencement of the case and for present fair equivalent value unless a copy or notice of the petition was filed, where a transfer of an interest in such real property may be recorded to perfect such transfer, before such transfer is so perfected that a bona fide purchaser of such real property, against whom applicable law permits such transfer to be perfected, could not acquire an interest that is superior to such interest of such good faith purchaser. A good faith purchaser without knowledge of the commencement of the case and for less than present fair equivalent value has a lien on the property transferred to the extent of any present value given, unless a copy or notice of the petition was so filed before such transfer was so perfected."