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Condo Association of 7 units: One owner has filed bankruptcy

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on her vacation unit, hasn't...
Condo Association of 7 units: One owner has filed bankruptcy on her vacation unit, hasn't paid monthly dues or annual building insurance for several years. Current board is ineffectual, no meetings, no financials, etc. Is it possible for me as one of the 7 owners to file a lien against her property for the back payments owed so that when the property is sold, our association can collect all that money that is owed. If I cannot legally file a claim against the errant owner, what can be done if anything? I am in Texas.
Submitted: 4 years ago.Category: Legal
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Answered in 13 minutes by:
6/14/2013
Lawyer: Barrister, Attorney replied 4 years ago
Barrister
Barrister, Attorney
Category: Legal
Satisfied Customers: 39,557
Experience: 17 yrs practice, Civil, Criminal, Domestic, Realtor, Landlord 26 yrs
Verified
Hello and thank you for using JA! My goal is to provide you with excellent service and help with your legal problem.
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When someone files bankruptcy, there is an automatic stay that is put in place by the bankruptcy court that prevents any creditor from taking any further actions to collect on debts that the debtor owes. Since it is likely that the owner has included the condo dues and debts on their schedule of creditors, no one could take any further action on that debt at this point due to the stay.
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If the Board did not take steps to file a lien prior to the owner filing bankruptcy, then they couldn't do so now. You as an individual owner wouldn't be able to file a lien because it would first require you to file suit against the owner for breach of contract. Since they have likely included this debt in their BK filing, you would be prevented from suing as well.
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Once the BK is over, if the owner ends up keeping the property, the Board or any owner could then take action against the owner if they violate any of the restrictions or rules of the COA since they would no longer be under the umbrella of protection the BK court provides.
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I hate to say it, but once the person files bankruptcy and it is ongoing, they are essentially protected from any type of creditor action under the bankruptcy laws.
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I am sorry to have to provide you with bad news, but please understand that I do have an ethical and professional obligation to provide customers with legally correct answers, even when an answer is not favorable to the customer.

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Thanks.

Barrister

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If you need further help, just reply to me via the “REPLY” button and I will be happy to continue.

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I cannot enter into an attorney client relationship, this is a public forum, and all posts are available for public viewing. There is no duty of confidentiality that attaches to any posts. The information provided is not a substitute for a local attorney’s legal advice.

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Customer reply replied 4 years ago

How could this have been prevented? Or is there nothing we as the association could have done? We are generally out the money just because this owner filed bankruptcy?

Lawyer: Barrister, Attorney replied 4 years ago
Well, if the Board had filed a lien prior to the owner filing bankruptcy, then their lien would have been secured by the property and they could have forced a sale of it to pay the lien. But if they haven't filed a lien before the BK filing, then they lose that right. That is why it is critical to get those liens filed and of record when they get to a certain amount agreed on by the Board. Typically if someone is 6 months behind, that is not a good sign and the Board should have an attorney they can call to file the liens to protect their interests and the other owner's interests.
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It is all about getting your lien recorded before the debtor files BK. The Board can still file a "creditor claim" against the debtor with the BK trustee that is handling the BK estate, but if there are not enough assets to pay all creditors, then the Association would lose because they are at the back of the line since there was no lien filed to secure their priority.
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Thanks
Barrister
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Barrister
Barrister, Attorney
Category: Legal
Satisfied Customers: 39,557
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Experience: 17 yrs practice, Civil, Criminal, Domestic, Realtor, Landlord 26 yrs

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