Can a lawyer who is trustee in a foreclosure file a motion in the debtor's bankruptcy to lift the automatic stay?

Plain-English summary

After foreclosure proceedings were instituted against a debtor who then filed for bankruptcy, the inquiry asked whether Attorney A, serving as trustee in the foreclosure, could file a motion in the bankruptcy court to set aside the automatic stay where the debtor had not contested the noteholder's right to foreclose. It also asked whether the answer changed depending on how far the foreclosure had progressed (before the clerk's hearing, after the hearing but before the 10-day appeal period ran, or after that period expired), and whether A could charge fees under N.C. Gen. Stat. §6-21.2.

The opinion concluded that, under CPR 166, an attorney serving as trustee may represent neither the lender nor the borrower in a role of advocacy in the foreclosure; while the attorney remains trustee, he owes a fiduciary duty to both, which would be violated by assuming an advocate's role. Under CPR 305, filing a motion to set aside the automatic bankruptcy stay places the attorney in an adversarial position, so Attorney A may not file such a motion while serving as trustee, regardless of the stage the foreclosure had reached when the debtor filed for bankruptcy. The opinion concluded the fee question under §6-21.2 was moot in view of that ruling.

Currency note

This opinion was issued in 1988, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct, and it rests on the North Carolina State Bar's earlier CPR opinions (CPR 166 and CPR 305) rather than a numbered Rule of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a foreclosure trustee move to lift the debtor's bankruptcy stay?

A: No. The opinion concluded that filing such a motion is an adversarial act the trustee may not take while serving as trustee.

Q: To whom does a foreclosure trustee owe duties?

A: The opinion concluded the trustee owes a fiduciary duty to both the borrower and the lender and may not act as an advocate for either.

Q: Does the stage of the foreclosure change the answer?

A: No. The opinion concluded the answer is the same regardless of how far the foreclosure had progressed when the debtor filed for bankruptcy.

Background and rules framework

The opinion did not cite a numbered Rule of Professional Conduct, resting instead on the North Carolina State Bar's earlier CPR 166 (a foreclosure trustee may not be an advocate for either side) and CPR 305 (moving to lift a bankruptcy stay is adversarial). The analysis turned on the trustee's dual fiduciary role, which is incompatible with taking an advocate's position for one party against the other.

Citations and references

Statutes:

• N.C. Gen. Stat. §6-21.2 (attorney's fees; addressed but found moot)

Other opinions cited:

• CPR 166 (North Carolina): a foreclosure trustee may not act as advocate for lender or borrower
• CPR 305 (North Carolina): moving to set aside a bankruptcy stay is an adversarial act

See also

• NC Ethics Op. RPC 64: former trustee's representation of purchaser against former debtor
• NC Ethics Op. RPC 167: receiving compensation from a potentially adverse party

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-46/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Inquiry:

If foreclosure proceedings have been instituted against a debtor who later files for bankruptcy, may Attorney A, who serves as trustee in the foreclosure, file a motion in the bankruptcy court to set aside the automatic stay, if the debtor has not contested the noteholder's right to foreclose?

Would the answer to the foregoing inquiry change if, at the time the debtor filed for bankruptcy, any of the following were true: 1) the hearing before the clerk of court in the foreclosure proceeding had not yet been held; 2) the hearing had been held but the 10-day appeal period had not yet run; 3) the 10-day appeal period had expired.

Finally, may Attorney A charge fees for his services pursuant to N.C. Gen. Stat.§ 6-21.2?

Opinion:

CPR 166 provides that an attorney who serves as trustee may represent neither the lender not the borrower in a "role of advocacy" in the foreclosure proceeding. So long as the attorney remains trustee, the attorney owes a fiduciary duty to both the borrower and lender. This duty would be violated if the attorney assumed the role of an advocate.

CPR 305 held that the filing of a motion to set aside the automatic bankruptcy stay places the attorney in an adversarial position. Consequently, Attorney A may not properly file such a motion while serving as trustee in the foreclosure. The answer to this inquiry remains the same, regardless of the stage to which the foreclosure had progressed when the debtor filed for bankruptcy.

Finally, the question whether Attorney A may collect legal fees pursuant to N.C. Gen. Stat. §6.21.2 appears to be moot in view of the above ruling.