Monday, August 19, 2013
Update to Bankruptcy Guide - In re: Valcarcel
A few months ago I wrote a post titled "Bankruptcy filed by Condo owner...now what?" Based on some of the feedback I received people questioned aspects of the analysis and what money could be collected. Bankruptcy is a tricky area and my analysis was based on the legal concepts as I understood them. At the time there was not specific legal authority addressing the issues I brought up. Then two weeks ago the Southern District of Florida come down with In re Valcarcel, 13–10303–BKC–AJC .
The facts of the case are this: Condo owner in Miami filed for bankruptcy, named the association as an unsecured creditor, association failed to respond, and the association's debt was discharged (the association has not filed a lien on the property yet). Some years later, the association filed foreclosure on the unit seeking not only the amounts owed since the bankruptcy was filed but ALSO those amounts before the bankruptcy and which were allegedly discharged.
The Bankruptcy Court had two major rulings 1) the condo owner was personally liable for assessments since the date of filing the petition forward. 2) the association could foreclose on the condo unit and seek collection of ALL amounts owed, pre and post petition for bankruptcy.
So what should a board member take away from this case??? Just because an owner files for bankruptcy doesn't mean the association is going to get nothing. If the owner/debtor plans to keep the unit after filing bankruptcy there's a strong likelihood the association will get most, if not all, of the unpaid assessments.
Like I say most of the time though, bankruptcy is a technical area of the law and you must be careful about when and to whom demands are made. It's worth it to contact your attorney and make sure these thing are done correctly.