In Re: Vincent J. Connors

When does a debtor's right to cure a mortgage default end? In its opinion filed on August 3, 2007, the Third Circuit Court of Appeals resolved a long-standing split of opinions between federal bankruptcy and district courts in New Jersey. The controversy revolved around the language of § 1322(c)(1) (11 U.S.C. 1322(c)(1)) of the Bankruptcy Code, and whether it affords the debtor a right to cure a default on a mortgage loan secured by the debtor's principal residence between the time the residence is sold at a foreclosure sale and the time the deed is delivered to the purchaser. The appeals court parsed the wording of § 1322(c)(1) and its legislative history to decide the issue, affirming the lower court ruling that § 1322(c)(1) creates a "gavel rule," ending the right to cure under that section with the fall of the gavel at the foreclosure sale conducted under state law. The court noted that a separate section of the Bankruptcy Code -- § 108(b) -- may extend the period during which a debtor can exercise post-sale remedies afforded under state law.