Avoiding A California Nonjudicial Residential Foreclosure – § 2924m Finality, Perfection, and Lien Avoidance Under § 522(f)

The following is a case update analyzing Financial Pacific Insurance Co. v. Tinsley (In re Tinsley), ___ B.R. ___, 2026 WL 1729811 (9th Cir. BAP June 15, 2026), the full decision can be accessed here.

Summary

The Ninth Circuit Bankruptcy Appellate Panel confirmed that under California Civil Code § 2924m a nonjudicial foreclosure sale is not “final” unless and until a mandatory bidding window (15 days, extendable to 45) has elapsed. A debtor with an interest in property who files a chapter 7 petition after the auction but before that window lapses still holds title, so the residence enters the estate.  Thus, a debtor may claim a homestead exemption, and has standing to seek to avoid a judicial lien encumbering such property.

Facts

The Tinsleys are Chapter 7 debtors with a home valued around $1,025,000. Financial Pacific held a judicial lien for roughly $76,862 recorded before the bankruptcy filing. The property went to nonjudicial foreclosure sale days before the petition date and concluded with a non-owner-occupant as the high bidder.

Since the property was residential and the winning bidder was not an owner-occupant, the § 2924m 15-day bidding period was triggered (in the Tinsleys’ case, the window was extended to 45 days given the lender’s receipt of qualified notices of intent to bid). The Tinsleys filed for bankruptcy relief during that window.

The debtors claimed a $617,000 homestead exemption. They moved under § 522(f) to avoid Financial Pacific’s judicial lien as impairing that exemption. Financial Pacific opposed, arguing the sale became final at the auction, so the debtors held no property interest on the petition date. The bankruptcy court held the property was estate property, applied the § 522(f)(2) formula, and avoided the lien in full. Financial Pacific appealed.

Before reaching the merits, the Panel confirmed the appeal was not moot under § 363(m), even though the trustee had by then sold the property to a good-faith purchaser through a settlement. Financial Pacific’s interest against the sale proceeds was preserved with the same priority and validity it held before the sale, so the Panel could still fashion effective relief by directing the proceeds.

The Panel ultimately affirmed.  It agreed with the bankruptcy court that the residential property was property of the estate because the nonjudicial foreclosure sale was not final under Civil Code § 2924m(c) on the petition date.

Reasoning

Reviewing de novo (no facts were disputed), the Panel worked from the three conditions for avoidance under § 522(f)(1): a fixing of a lien on an interest of the debtor in property; impairment of an exemption to which the debtor would be entitled; and a judicial lien. Only the first was genuinely contested — whether the Tinsleys still held an interest in the residence when they filed.

For residential property of one to four units, § 2924m(c) provides that a trustee’s sale “shall not be deemed final” until the earliest of several enumerated events. Here the winning bidder was not an owner-occupant, so pursuant to § 2924m(c)(2), the auction did not make the sale final, and the sale was still not final when the Tinsleys filed bankruptcy.

Financial Pacific’s main argument leaned on § 2924h(c), under which a trustee’s sale is “deemed perfected” as of 8 a.m. on the actual sale date if the deed is recorded within a set window (60 days where an eligible bidder has submitted a notice of intent to bid). The Panel rejected the argument as a conflation of the issues of perfection and finality. Perfection relates back; finality does not. Recording the deed after the petition is an act of perfection that the automatic stay permits under §§ 362(b)(3) and 546(b) — but perfection does not bear on finality in this context. Finality in this case was governed directly by § 2924m and as such, the sale, although perfected, was not final.

Financial Pacific’s fallback was that the sale was at least final as to the Tinsleys, which Financial Pacific asserted extinguished the Tinsleys’ interest or converting it into some species of temporary title. The Panel rejected this as contrary to the statute’s text. Section 2924m(f) keeps title with the trustor until the sale is final and says nothing about partial finality or temporary title. The Tinsleys therefore held title, and an interest that became property of the estate, when they filed.

Once the Panel concluded that the Tinsleys still had an interest in the property that became property of the estate, the rest of the analysis was essentially a foregone conclusion: the Tinsleys were entitled to claim a homestead exemption in the property and had standing to pursue avoidance of judicial liens

Author’s Commentary

For now, the rule for California practitioners is clear: when a residential property in the one-to-four-unit range is sold to a non-owner-occupant at a nonjudicial foreclosure, the sale is not final until the § 2924m window closes. 

These materials were written by Michael W. Davis, Senior Counsel at Cox, Castle & Nicholson LLP, a commercial real estate finance attorney and bankruptcy litigator and a past Co-Chair of the ILC, with editorial contributions by  Aaron E. de Leest, a Partner at Marshack Hays Wood LLP, and by the Hon. (ret.) Meredith Jury.