Tag Archives: filing

Is foreclosure best option to get debt paid?

by: Mike Hunter

mike_hunterCharlotte attorney Michael Hunter specializes in community and condominium association law for the firm of Horack Talley.

Q. It seems in today’s economy that a lot of HOA foreclosures don’t result in a collection of the debt owed to the HOA. The owner either abandons the property, or the HOA lien is extinguished by the foreclosure of a superior deed of trust to a mortgage lender. It seems the HOAs rack up a lot of fees to foreclose against homeowners that are going to walk away from the debt one way or the other. Is there a better option?

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Best bet is to use attorney for filings

Q. Is it possible for an HOA to file a foreclosure on a residence without an attorney?

As to whether a non-lawyer can file foreclosures, I checked with David Johnson, an attorney with the N.C. State Bar.According to Johnson, the N.C. Court of Appeals has held that corporations may not appear before the courts unless represented by counsel, except for cases in small claims court or to avoid the entry of a default in a higher court. Because a foreclosure proceeding requires the preparation and drafting of court pleadings and a court appearance, an incorporated HOA may not lawfully conduct its own foreclosure without an attorney.

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Are unpaid dues protected in bankruptcy?

Q. Is the debt of an uncollected homeowners association annual dues assessment considered a “secured debt” when filing a Proof of Claim if the owner files for bankruptcy, since it involves real estate (vacant land or land with a home)? Or is it just an unsecured debt?

Creditors of a bankrupt person who has filed for protection are generally lumped into one of two categories by the federal Bankruptcy Code: secured creditors and unsecured creditors. To understand the difference, it is important to understand the difference between a debt and a lien. A debt is a legal obligation to pay money to a creditor. A lien, on the other hand, is a property interest held by the creditor that secures the underlying debt. Thus, secured creditors hold a lien on certain property owned by the debtor (real estate, motor vehicle, equipment, etc.), while unsecured creditors do not have a lien on property owned by the debtor.A Chapter 7 or completed Chapter 13 plan will discharge most or all of a person’s debts, but many liens will survive the bankruptcy discharge, meaning that the creditor may still repossess or foreclose on the collateral even though the debt has been discharged. While this may seem counterintuitive, it makes sense if you think of a mortgage loan. If the lender’s mortgage lien on a home were wiped out by a bankruptcy filing along with the underlying debt, then that would mean any homeowner who filed bankruptcy could keep his house free and clear of the lender’s debt. Certainly that is not the result that Congress intended with the Bankruptcy Code.

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