Bankruptcy Court Rules that “Absent” Owner in Chapter 7 Must Pay, So Long as They Remain Owner

post-petition amounts, and subsequently levied on the debtor’s bank account. Prior to filing the motion, the debtor requested the bankruptcy case be reopened so that she could list the Association as a creditor, since she had failed to provide initial notice to the Association. After the bankruptcy case was reopened, the debtor then filed the motion against the Association, claiming that the subsequent levy was improper. 

2005 Amendments to the Bankruptcy Code
After extensive oral argument, the Court found that the 2005 Amendments to the Bankruptcy Code clearly widened the scope of non-dischargeability under § 523(a)(16). The statute provides that a chapter 7 discharge:                      

“…does not discharge an individual debtor from any debt…for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership…for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot…” (Emph. added).

As such, the Court ruled that the debtor remained liable for post-petition assessments. 

Know Your Collection Rights in a Bankruptcy Case
Unit owners often feel that once they file a chapter 7 bankruptcy case and vacate the unit that they are free from the duty to pay their assessments to the Association. This decision validates and supports an Association’s efforts to ensure owner payment of these assessments. 

Associations should not “give up” when bankruptcy is filed. When an Association knows its rights, and has counsel experienced in representing Associations vis-à-vis bankrupt owners, it can successfully navigate an owner’s bankruptcy and recover unpaid assessments.

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