Nonjudicial Foreclosure Under Deed of Trust May Be a Fraudulent Transfer of Bankrupt's Property: Durrett v. Washington National Insurance Co.
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In theory, the substantive rights of secured creditors such as mortgagees are affected much less by bankruptcy proceedings than those of unsecured creditors. In practice, however, bankruptcy proceedings have affected mortgagees. Filing a bankruptcy petition automatically stays pending foreclosures. Trustees in bankruptcy also can set aside foreclosures of certain liens obtained by unsecured creditors and certain mortgages and deeds of trust executed in the year preceding bankruptcy. The decision in Durrett adds yet another weapon to the bankruptcy trustee's arsenal: the power to void nonjudicial foreclosure sales even though the sale is proper and final under state law.
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