If you file for Chapter 13 bankruptcy and owe money to a homeowner’s association or condo association assessments, you may be left wondering how your bankruptcy impacts an association’s ability to collect assessments post-bankruptcy.
A 2016 bankruptcy case from the Southern District of Florida ought to shed light on the specifics of just such a situation after bankruptcy.
The Case of In re Ramirez
In the case of In re Ramirez, 547 B.R. 449 (Bankr. S.D. Fla. 2016), a married Florida couple were debtors who filed a Chapter 13 bankruptcy. The couple aimed to discharge their debts by arranging a partial payment plan to creditors, which was approved by the court.
Naturally, the couple received a discharge once they completed the agreed upon payments according to the terms of the plan. Post-bankruptcy, however, the couple’s condo association tried to collect post-petition assessments that began accruing after the couple petitioned and filed for bankruptcy.
The condo association sued the couple, obtaining a judgment against the married pair in the process. The couple then responded by filing a motion for sanctions against the condo association, reasoning that the association’s attempt to collect assessments after bankruptcy was a direct violate of the discharge stay. Additionally, the couple also requested fees and damages, arguing that the condo association should be held in contempt for attempting to collect these assessments in violation of the Chapter 13 discharge stay.
Chapter 13 Discharge Stays
In a Chapter 13, a discharge stay — also known as an automatic stay — automatically prohibits and prevents creditors from collecting on discharged debts.
The complication to the couple making such a claim in their specific case was based partially on the fact that Congress enacted a 1994 federal law — 11 U.S.C. § 523(a)(16) — that clearly states a bankruptcy discharge does not discharge condo or HOA assessments post-bankruptcy so long as the debtor continues to own said property. However, this same federal law also states that assessments that arose prior to bankruptcy are, in fact, discharged.
When weighing the evidence, facts and both previous and pending cases, the U.S. Bankruptcy Court in the Southern District of Florida found that the owner’s personal liability for a condo association or HOA’s post-petition assessments were extinguished by a bankruptcy discharge under Chapter 13.
While this portion of the court’s ruling ended up in the couple’s favor, the court also noted that the lien for assessments survived the couple’s bankruptcy discharge, which allowed the condo association to foreclose on the lien and enforce the assessment, even post-bankruptcy.
Practically speaking, this ruling simply means that the money judgment granted to the condo association was set aside, which protected the couple from personal liability. At the same time, the court did not hold the association in contempt because the Courts of Appeal had yet to decide whether the personal obligation is discharged post-bankruptcy.
The takeaway, then, is that prepetition condo/HOA assessments are discharged as a personal obligation, which leaves associations only with the ability to file a proof of claim before enforcing the assessment lien against the property. The law is currently less clear on what happens to a person’s obligation in post-bankruptcy assessments, but the assessment lien may still be enforced against the property.
As these Chapter 13 complexities continue to evolve, it is important to choose a reliable bankruptcy attorney who can help you navigate these laws and court decisions.
John F. Greene is a bankruptcy lawyer who helps Destin debtors in need of bankruptcy relief. From his Destin office, he also represents individuals in need of legal counsel for a bankruptcy throughout Northwest Florida and the Emerald Coast, including Santa Rosa, Walton, Bay and Okaloosa Counties. Additionally, discuss your bankruptcy with John if you live in the communities of Destin, Niceville, Fort Walton Beach, Panama City and Santa Rosa Beach.