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Bankruptcy and Collections: What you need to know

Bankruptcy and Collections: What you need to know

Winter is fast approaching and you may be wondering how your association is going to pay its bills if there is another bad winter.  Your delinquencies may be up and you see no hope in collecting all the money that is due.  Then the delinquent homeowner who was paying files bankruptcy.  Your frustration turns to anger, because the other members of your association are demanding services.  What hope is there to collect an account once a bankruptcy is filed? 

An individual homeowner can file two types of bankruptcy.  A Chapter 7 Bankruptcy eliminates the homeowner’s responsibility to pay pre-petition balances.  A Chapter 13 Bankruptcy requires the homeowner to repay the pre-petition debts to the association – albeit during a longer period of time.  When either type of bankruptcy is filed, the association is not allowed to attempt to collect any debt from the homeowner without first obtaining authorization from the Bankruptcy Court. 

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