A borrower, in an effort to avoid the sale of the Property by either of the two methods described, may seek the protection of an automatic stay (a prohibition against any further foreclosure action) by filing a petition in bankruptcy in federal court or bringing an action in state court to restrain the non-judicial foreclosure sale (Temporary Restraining Order).
A bankruptcy petition which is filed in federal bankruptcy court prior to the foreclosure sale of the Property prevents the trustee in a non-judicial foreclosure, or a state court in a judicial foreclosure, from selling the Property without relief from the automatic stay. A Temporary Restraining Order (TRO) will act to delay the trustee’s sale until the state court determines whether a preliminary injunction is to be granted until a full hearing or trial can be held on the matter. You will need the assistance of legal counsel to appear in the bankruptcy court to ask the court to grant relief from the automatic stay (a removal of the prohibition against further foreclosure action). The assistance of legal counsel will also be required to respond to a TRO. It is important to act quickly when responding to a borrower’s bankruptcy petition or request for a TRO.
NOTE: Your quick response could ensure that sufficient protective equity remains to pay the total amount owed to you, including all fees, costs, and expenses incurred in processing the foreclosure and in responding to the federal bankruptcy petition or state court action (e.g., legal fees, costs, and expenses).