Community Associations Institute

November 5, 2009

Co-Owner Bankruptcy: 

How it may affect your Association

I. Introduction
 
II. So a co-owner in your Association has filed a Bankruptcy Petition.
 
    A.  Will you receive notification?
                    
    B.  The Effect of the Automatic Stay 11 U.S.C. 362 -Collection/Foreclosure Actions
 
    C.   What is the Bankruptcy Estate?  Is the Unit part of the Estate?
 
    D.   What should the Association do upon receiving notice?
                     -Place account on hold
                     -Contact Association's Counsel
 
     E.    What shouldn't the Association do upon receiving notice?
                     -Direct Contact Regarding Any Debt
                     -Actions against Debtor
                        a.   Foreclosure
                        b.   Litigation
                        c.   Garnishments
                        d.   Evictions
                        e.   Violations / Sanctions?
 
      F.    What are all of these different Chapters?
      
III.  Chapter 7 - Liquidation
 
      A.  Why did they file a Chapter 7 Bankruptcy?
              1.    In General
              2.    Secured or Unsecured Creditor
      B.  Chapter 7 Timeline – How long will this last?
              1. Debtor’s Schedules and Statement of Intent
                    a. Surrender/Reaffirm Debt
                    b. Reaffirmation Agreements
              2.  341 Meeting of Creditors
              3.  Trustee Evaluation of Bankruptcy Estate
                     a. Report of No Assets or Notification to File Claims
                     b. Proof of Claim
                     c. Motion for Relief
                     d. Other Interested Creditors?  Mortgages?
              4.    Order of Discharge/Denial of Discharge
                     a. Effect of Discharge on Liens
                     b. Effect of Discharge on Personal Liability
              5.    When Does that Automatic Stay Lift?
       C.    What can the Association do?
                -Exemption under 11 U.S.C. 523(a)(16)
                -Unsettled Law regarding Fees/Costs
                -Personal Judgment
                -Is there a lien on the unit?
 
IV.    Chapter 13 - Reorganization
 
        A.  Why did they file a Chapter 13 Bankruptcy?
              1. In General
              2. Secured or Unsecured Creditor
        B. Chapter 13 Timeline – How long will this Last?
              1. Petition
              2. Debtor’s Chapter 13 Plan
                   a. Importance
                   b. Intentions of Co-Owner/Debtor
                   c. Cure Arrearage vs. Surrender Property
                   d. Classifying Claims
                   e. Order of Payment of Claims
                   f. Timing of Payments
              3.  Proof of Claim
                   a. What Needs to be Included?
                   b. Objections to a Proof of Claim
              4.  341 Meeting of Creditors
              5.  Plan Evaluation Period
                   a. Is Your Claim Treated Properly?
                   b. Objections to Confirmation of the Plan
              6.  Confirmation Hearing
                     a. Confirmation, Dismissal and Adjournments
                     b. The Effect of a Confirmed Plan
              7.  Post-Confirmation Period
                     a. Importance of Creditor Vigilance
                     b. Proper Application of Disbursements
                     c. Post-Confirmation Problems and Solutions
                     d. Periodic Payment Adjustments/ Amending your Proof of Claim
                     e. Legal Fees?
                     f.  Other Interested Parties
              8.  Discharge in a Chapter 13 Case
                     a. 30-day Warning – LBR 2015-5
                     b. Discharge Effect
                     c. What Can be Pursued Following Discharge?
                    
              What happens when a Case is Converted between Chapter 7 and Chapter 13?
 
V.    What are the options for the Association after BK?

John L. Finkelmann

Wegner and Associates, P.C.

23210 Jefferson Avenue

St. Clair Shores, MI 48080

(586) 773-1800; (586) 773-1805 (fax)

Website: www.wegnerlaw.com

E-Mail: jfinkelmann@wegnerlaw.com