Section 523(a)(16) of the BAPCPA provides for an exception to discharge for assessments that come due after the bankruptcy petition is filed. Associations can, therefore, pursue their members for assessments that accrue after the date of filing, but not those that accrue before the date of filing.
A new opinion issued this week by Judge Squires deals with an interesting situation where the debtors' unit flooded just two days before their bankruptcy filing. Then, several months after the bankruptcy filing, the association levied a special assessment against all unit owners to cover the cost of the flooding.
The association sent several letters and notices to the debtors without obtaining relief from the stay or otherwise seeking the guidance of the bankruptcy court. When those notices went unanswered, the association filed suit in state court. The debtors then moved for sanctions against the association in bankruptcy court for a willful violation of the discharge order.
The issue for the bankruptcy court was whether this special assessment was a pre-petition or post-petition debt. The court looked to the language of Section 523(a)(16), which excepts from discharge any assessments that "come due and payable" after the petition is filed. The court did not give much weight to debtors' argument that the special assessment was related to a pre-petition obligation that arose on the date of the flooding. Rather, the court looked to the date on which the special assessment came due and payable, which was after the petition date.
HERE is a link to the opinion.
This case sounds like it could have been decided either way, and for whatever reason, the court decided to side with the HOA. Whether the obligation accrued on the date of the flooding or the date of the assessment is a rather technical point. Could an HOA use this reasoning to purposely delay assessments against owners?
Proper assessment is required when it comes to properties. This needs to be done accordingly.
I think they have won the case technically. Those dates of filing for bankruptcy is what justified the decision.
Condo and Homeowners need to be vigilant in every single details to prevent foreclosures. An assessment is indeed very important to ensure legality of the documents. It is also important for both parties to get their bankruptcy lawyers to properly settle the case.
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I agree with the comments. Property owners must have a better assessment before dealing with any kind of contract. This will ensure legality and authenticity of the terms and agreement.
I always make sure that the property I am interested is in good condition. Bankruptcy filing won’t be a problem if you have a good lawyer.
Bankruptcy is an issue when it comes to property management. They have to petition for a fair negotiation on the purchase.
I have to agree that whether the obligation accrued on the date of the flooding or the date of the assessment is a rather technical point. HOA must have been using this issue to delay the assessment. Homeowners should be more responsible next time.
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Its really saddening that something like has to happen, I hope that they get back on their feet really soon.
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