Bates v. Cohn Changes the Debtor's Rights in Foreclosure


Apparently, Maryland no longer follows the "kitchen sink" approach when it comes to issues that a debtor is able raise in a foreclosure exceptions hearing.

In recent Bierman v. Hunter decision, the appellate court held that a debtor may be able to raise ANY substantive issues in an exceptions hearing, at least as we read it.

However, it seems that with the Bates ruling, the appellate court reverted to its earlier decision in Greenbriar, 387 Md. at 688: “Should a sale occur,the debtor's later filing of exceptions to the sale may challenge only procedural irregularities at the sale or the statement of indebtedness·”

The following citation puts the debtors on notice that whatever substantive arguments he/she may have, they better be addressed in a pre-sale injunction:

Generally, injunctions are to be filed prior to the action which they seek to forestall. The timing of this remedy is not elective. Were a post-sale injunction retroactively overturning a sale permitted, such a remedy would not only be counter to the logic and nature of injunctions, but would give rise to conflicts among the interested parties. The debtor might seek another bite at the apple, or some other junior lien holder might enjoin only if the sale fetched a price insufficient to satisfy his debt.

The equities cannot be maintained-and are not intended to be maintained-after the foreclosure sale by any method other than the filing of exceptions. The nature of the exceptions may be to request that the Circuit Court take action relative to an audit that has been duly stated or even to set aside the sale due to irregularities in the sale process itself-but not to upset retroactively a sale properly held.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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