A nonprofit can file for Chapter 11 (reorganization) or Chapter 7
(liquidation) bankruptcy, the same as any other corporation.
if you file for Chapter 7, the bankruptcy trustee
will attempt to sell all of the common areas of your community to a third party. That third party will be entitled to charge you for the use of the property. This will effectively remove all control over the community from the homeowners, which could end up causing everyone to suffer much higher HOA assessments.
If you file for Chapter 11, then you may be able to create a plan that will permit you to pay your unsecured creditors at a lesser rate than you currently do. However, a Chapter 11 is expensive in terms of legal fees, so you must determine whether or not the cost is worth the amount of debt that you can avoid.
There's no way to evaluate this without consulting a local bankruptcy law firm with previous experience in HOA bankruptcies -- because of the very specialized nature of the proceeding.
No ordinary bankruptcy lawyer will be able to handle your case. You will likely need a fairly sophisticated law firm. For a referral, see: www.martindale.com.
Hope this helps.
Terms and Conditions: By your continuing in this conversation with me, or by your clicking “Accept”, you are expressly agreeing to all of the following: (1) our communication is for entertainment purposes only; (2) you are not consulting me in my professional capacity as an attorney (or, for the purpose of obtaining debt relief counseling under the U.S. Bankruptcy Code); (3) you do not seek to establish an attorney-client relationship with me, nor do I with you; (4) you will not rely on anything I say and you will obtain appropriate legal counsel via a traditional/office consultation with an attorney licensed to practice in the jurisdiction where your legal issue arises (and you may not use our communication to avoid taxpayer penalties imposed by the U.S. Dept. of Treasury); (5) by communicating with me in this public forum you are irrevocably waiving any right to privacy, confidentiality and attorney-client privilege concerning the matters discussed. You further separately declare that any payment made by you is not consideration for this contract, nor offered for any services rendered by me on your behalf, but rather is made in genuine admiration and respect for my desire to help others. If you do not agree with these terms and conditions, then you must advise me immediately.