Bankruptcy

 

What should you do when you receive a notification of bankruptcy?


As soon as you receive a notification of bankruptcy, you are legally bound to immediately cease all correspondence with the owner and take no further action to collect any debt from the owner.

 

Should you file a proof of claim?


In most of Chapter 7 cases, the notices that you receive specifically request that you do not file a claim. If however the notice that you receive (Chapter 7 or 13) requests a proof of claim and you wish to collect any of the pre-petition assessments, you must file a proof of claim by the given deadline.

 

 

 

What are the different types of bankruptcy that a homeowner can file?


There are three types of bankruptcy that commonly affect community associations: Chapters 7, 11 and 13. The two that usually affect associations the most are Chapters 7 and 13. In a Chapter 7 bankruptcy, the debtor has little or no income; hence, their personal obligation towards most of their debt is discharged. Chapter 13 bankruptcy, on the other hand, usually includes a debt repayment plan unless the delinquent owner tries to strip the association’s lien. Please note that an owner’s bankruptcy can usually only discharge the homeowner’s personal obligation and usually does not affect an association’s right to foreclose on its lien against the owner’s property.

 

What are pre-petition and post-petition assessments?


Everything a delinquent homeowner owed up to the date they filed their bankruptcy petition is pre-petition debt and is included in the bankruptcy proceedings. Everything from that date forward is post-petition debt and is usually not subject to discharge by the bankruptcy court.