The filing of a bankruptcy by the debtor will stay a foreclosure sale upon the debtor’s property. Generally, however, a bankruptcy filing by a joint venture or a partnership will not prevent collection efforts against any individual partner or venturer; it is the property owned by the venture or the partnership that may not be pursued by the Bank. Likewise, a venturer’s or a partner’s bankruptcy generally will not prevent the Bank from foreclosing on venture or partnership property.
Upon notice of a bankruptcy filing, the Bank must cease all efforts to realize upon its security or to collect the note from the debtor; otherwise, the Bank will risk being held in contempt of the Bankruptcy court. In order to foreclose, the Bank must obtain a “lift of stay” in the Bankruptcy court. A “lift of stay” is the Bankruptcy court’s order permitting the Bank to proceed to foreclosure. See Chapter 20, “Bankruptcy.” If the security is residential real property, see Rescission of Nonjudicial Foreclosure Sales on Residential Real Property below.