On March 2, 2010, the Massachusetts Bankruptcy Court issued "Emergency Standing Order 10-2" addressing certain provisions of Loan Modification and Forbearance Agreements.
Emergency Standing Order 10-2 effectively voids any provision of any loan modification or forbearance agreement which states that upon default of the lender, the benefits of the automatic stay are waived. Prior to Emergency Standing Order 10-2, if a modification included such a waiver, the bank or mortgage lender could proceed with a foreclosure or other collection actions despite the filing of a Chapter 7 or Chapter 13 bankruptcy. Any individual considering a loan modification should be very careful when considering the terms offered by the lender in any loan modification. Nevertheless, Emergency Standing Order 10-2 effectively extends the protection of 11 U.S.C. s. 362(a) to cases where lenders have attempted to circumvent automatic stay protections through prior modifications, forbearance agreements or other loan workouts by voiding any provision in any agreement which attempts to waive automatic stay protection.
The full text of the order is available here.