Dealing With Homeowner Bankruptcies

There are so many rewarding things about being on an HOA board. You get to know your community members better and you get to work hard to make your home a better place.

However, there are also some difficult jobs that come with being on the board. One of the hardest is dealing with homeowner or member bankruptcies. This can be emotionally difficult, especially if you know the homeowners who are struggling financially. It can also mean working with lawyers, making sure you take care of the HOA’s interests in the situation.

COVID-19 and Bankruptcy

When the COVID-19 crisis started, the government gave people up to $600/week in addition to their normal unemployment benefits if they lost work because of the pandemic. This allowed people to continue making normal mortgage and HOA assessment payments.

However, those benefits ended in the summer and more recent benefits are also expiring. This puts many people, especially in Florida, in a financial crisis. HOA’s need to get ready for a high number of bankruptcy filings – the number may even break records!

Chapter 7 vs. Chapter 13 Bankruptcy

In Florida, people can file either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. Filing a Chapter 7 usually means that a person is liquidating their non-exempt assets, like their home, to liquidate their debt. In certain circumstances, a person can keep their home, but these incidents are few and far between.

A Chapter 13 bankruptcy means that the person agrees to a debt repayment plan that will allow them to keep their home. This repayment plan must be detailed and must be approved by the court. People or companies who are owed may object to the plan or ask for corrections.

The key thing to remember if you’re on an HOA board is that the association must abide by all of the court deadlines. If there is inaccurate information in a filing or you object to a repayment plan, you must file documents with the court by your deadline. While most of this will be handled by your lawyer in consultation with the board, you may want to appoint someone to stay on top of these deadlines.

If the association does not recoup everything due them during a bankruptcy proceeding, there’s still a chance to get the money they are owed. Under Florida law, new buyers can be held responsible for arrears that were not paid as part of the bankruptcy case. To make sure you get what you are owed, keep a lawyer experienced in creditors’ rights on retainer.

At AMI, we can help you get through this difficult season of bankruptcies and COVID-19. Contact us today to find out how our experts can make this difficult task easier for you. Stop making all of the stress and strain that comes from dealing with member bankruptcies into your own personal burden and let us carry some of the weight for you. We’ll design a plan that will make your whole association work better!