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June 2008 ISSUE
We do not make jokes, we simply watch the LA Times, the Orange County Register and CID/HOA board of directors and report the facts!
COLUMN
c) 2001-2007 S.GLASSMAN AND D.VANITZIAN. All
rights reserved. The Associations and Common Interest
Living articles and columns may not be reprinted or
retransmitted in any form without the express written
consent of the copyright holders. The authors take no
position regarding any documents or accompaniments
that may be enclosed with, attached to, or alongside
said article reprints or distribution. Los
Angeles Times, Real Estate Section,
"Associations," June 1, 2008 Bankruptcy Won't Protect You From Future Dues By Stephen Glassman
and Donie Vanitzian, Special to The Times
Bankruptcy Won't Protect You From Future Dues
By
Stephen Glassman and Donie Vanitzian, Special to The
Times
June 1, 2008
QUESTION: If owners cannot afford the monthly
homeowner association dues that rise on a yearly
basis, can each owner file for individual bankruptcy?
ANSWER: Any titleholder can file for bankruptcy, but
the qualifications have become more stringent than
they used to be because of the Bankruptcy Abuse
Prevention and Consumer Protection Act, (BPCPA)
which took effect Oct. 17, 2005, and is considered to
be a major reform of the bankruptcy program.
Presuming the association has not yet filed a lien on
the owner's property, the bankruptcy may discharge
homeowner association assessments and/or dues that a
titleholder owed before filing for bankruptcy
protection. But association assessments that come due
after the bankruptcy filing are not discharged and
will have to be paid.
The law states that the failure to pay association
assessments and/or dues may result in the loss of an
owner's property through foreclosure. Foreclosure may
occur either as a result of a court action, known as
judicial foreclosure, or without court action, often
referred to as nonjudicial foreclosure.
Since Jan. 1, 2006, it has been the law that an
association may not use judicial or nonjudicial
foreclosure to enforce a recorded lien if the amount
of the delinquent assessments and/or dues, exclusive
of any accelerated assessments, late charges, fees,
attorney's fees, interest and costs of collection, is
less than $1,800. For delinquent assessments or dues
of $1,800 and up, or more than 12 months delinquent,
an association may use judicial or nonjudicial
foreclosure.
A number of associations are aggressively pursuing the
money they believe is owed to them. Some even
are attempting to circumvent the various protections
written into the Davis-Stirling Act by filing Small
Claims Court actions for outstanding assessments in
amounts ranging anywhere from $1 up to the
jurisdictional limit of $7,500 and obtaining judgments
for such amounts.
If the association obtains a judgment in any court and
it is not satisfied by payment, then interest will
accrue and everything from garnishment to liens can
take place until the judgment is paid or until a
bankruptcy is filed.
Judgment debtor exams (ordered by the court to uncover
assets and net worth) also are allowed but stop after
the bankruptcy petition is filed and end permanently
after a "discharge" is granted because the
titleholder is presumably no longer personally liable
for the obligation.
The bankruptcy process is complicated, limited in
scope and typically used as a last resort.
Consumers cannot file a bankruptcy petition more than
once every six years, they cannot receive a discharge
more than once every seven years, and the bankruptcy
information stays on the consumer's credit record from
seven to 10 years.
But after two years, the effect of a bankruptcy is
minimized in determining one's credit score, depending
on one's credit history following the discharge and
its fiscal impact on giving the consumer a "fresh
start." For more information, visit the
Department of Justice website at www.justice.gov/ust/eo/bapcpa.
Care must be taken when deciding whether or not to
file for bankruptcy because it could result in a loss
of equity in one's personal and real property. Before
filing for bankruptcy, try meeting with the board and
requesting that a payment plan be implemented.
A fact of owning deed-restricted property in
common-interest development projects is that, as the
costs of living rise, so too do the operating fees.
This often increases the monthly assessment and dues
payments for everyone.
If "all" the owners cannot afford to pay
monthly assessments, then the board must take
immediate action to streamline its operation and
drastically cut costs. If only you cannot afford to
pay monthly assessments, then you may have to sell and
move.
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