What can an HOA do to collect POST-petition bankruptcy dues?

I am a member of an HOA and one of our members has not paid his dues in quite some time. We have already filed an assessment lien against the property. We were going to foreclose and evict the owner but he recently filed for Chapter 7 Bankruptcy. I know that our past fees are discharged, but the lien remains, and that while he is in Bankruptcy we can't take any action to collect our fees. My question is what can the HOA do to collect POST-petition HOA fees? Are post-petition fees also protected by automatic stay? How long do we have to wait before we can send a notice of fees due? And what options do we have to collect any pre or post petition dues? Any help is appreciated. Thanks!

San Diego, CA -

Attorney Answers (2)

Valerie Farris Oman

Valerie Farris Oman

Residential Real Estate Lawyer - Seattle, WA
Answered

I don't practice in CA but bankruptcy law is federal and so I can comment generally on how bankruptcy affects an association's ability to collect.

When someone files for bankruptcy, an automatic stay arises preventing creditors from taking action to collect debts owed by the owner. Chapter 7 bankruptcies, once discharged, eliminate the owner's personal liability for any amounts due through the date of the bankruptcy filing. Bankruptcy discharge does not affect an association's lien against the property.

As long as the bankruptcy case is open, the automatic stay remains in effect. In order to take action to foreclose the lien or collect post-petition debt, one of two things must happen. Either you must obtain "relief from stay" - permission from the bankruptcy court to take the requested action - or you must wait for the bankruptcy to be discharged and closed/terminated.

You should consult with an attorney experienced in both community association law and bankruptcy law who can advise your association on whether to move for relief from stay or whether to simply wait until the bankruptcy case is closed. Check out the California chapter of the Community Associations Institute - they should have a list of experienced community association lawyers for your reference.

Good luck.

Avvo answers are intended to provide general information only; not legal advice.
James Carl Eschen III

James Carl Eschen III

Real Estate Attorney - Santa Cruz, CA
Answered

Because you filed an assessment lien before the bankruptcy, the unpaid prepetition assessments are not automatically discharged. You have to ask the court to set aside the automatic stay to proceed with the foreclosure. If the member also has an unpaid mortgage, the lender has priority to do the same thing, so the prepetition assessments are probably uncollectable.

The automatic stay operates only on the collection of prepetition debts. Any debts that arise after the petition you may still try to collect. But, if the member does have a lender that is foreclosing on him, you cannot do much, anyway. Even if you recorded a lien for postpetition assessments, the bank's foreclosure would wipe it out.

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