For condominium boards foreclosing on unpaid common charges, it’s common to see a unit owner file for bankruptcy right before a scheduled auction and claim the sale must stop. Bankruptcy often does pause a foreclosure—but there are real limits, especially when the owner has filed and dismissed multiple cases in a short period. With the right strategy, boards can often keep a sale moving forward.
The MTGLQ Investments Decision: A Useful Example
In MTGLQ Investments, L.P. v. Emego, a borrower filed bankruptcy one day before a scheduled foreclosure sale, then tried to undo the sale afterward. The court refused. It held that the bankruptcy filing did not automatically stop the sale because the borrower had a recent pattern of bankruptcy cases that had been dismissed.
In plain terms: the owner assumed that filing again would automatically freeze everything. The court said it didn’t work that way under these facts.
What Happens When an Owner Files Over and Over
Most people know that a bankruptcy filing usually triggers an “automatic stay” that temporarily stops collection and foreclosure activity. But repeat filings can change that.
In this case, the court focused on the owner’s prior bankruptcy history and found that, because of multiple recent dismissed cases, the usual automatic stay never started at all. That meant the foreclosure sale could proceed, and the deed issued after the sale remained valid.
The Owner Can Still Ask for Protection—But It’s Not Automatic
Even when the automatic stay does not apply, a unit owner may still ask the bankruptcy court to impose a stay. But that requires an actual request and a court order—and timing is everything.
In MTGLQ, there was no showing that the owner obtained any court-ordered stay before the auction. Without a stay in place before the sale, the owner could not use the bankruptcy filing to unwind what happened.
Practical Takeaways for Condo Boards
As experienced condo and bankruptcy counsel, these are some of the things we do when prosecuting a common charge line foreclosure for our condo boards:
- Check for prior bankruptcy filings early. Repeat filings may limit or eliminate the owner’s ability to stop a sale automatically.
- Check the details of the owner’s bankruptcy filing history.
- Watch the bankruptcy docket closely. If the owner tries to get a court-ordered stay, we are ready to respond quickly.
- Coordinate with the referee and other sale participants. Clear communication reduces confusion and prevents unnecessary adjournments.
Why Experienced Counsel Matters
These issues sit at the intersection of foreclosure procedure and bankruptcy rules. Boards benefit from counsel who can quickly evaluate whether a new bankruptcy filing actually stops a scheduled sale, and who can guide the board, the referee, and other parties through the correct next steps.
A bankruptcy filing can be a powerful delay tactic—but not always. MTGLQ is a reminder that courts will enforce limits on repeat filings, and that a board with experienced counsel may be able to proceed with a foreclosure sale even when the owner files at the last minute.
Here’s the Court’s decision:
